Silver Trading & Futures Price movements have been relatively stable in a price range that many would consider cheap. Most traders & investors in the Precious Metals Markets would miss out on investing in Silver and also the potential wealth creation opportunity that Silver Trading presents currently because of uncertainty and lack of constructive concrete information. The recent surge of increased investor interest in Silver Trading indicates that Silver Prices are due for a strong rebound. Investors with a long term outlook should remain patient for returns to bloom.
Quantitative Easing or Economic stimulus efforts expected to be initiated anytime now on in the U.S. & Eurozone have a very strong potential of increasing Inflation levels sharply. Silver could perform stronger and be a better investment than most of the other investment avenues available currently. Silver & Gold will always be worth more than paper commodities (Currency) because they are a physical asset and also finite in supply, but always high in demand due to their inherent preciousness value. The margins for Silver Trading have also been considerably lowered thrice this year from the high margin slabs imposed last year & this may also make Silver Trading sweeter. Silver Trading is currently seen moving in the upper boundary of its trading range of late, suggesting a Silver Prices Breakout on the upside is possible soon.
With Gold Prices at much higher levels & out of reach of most of the small investors & them essentially being the largest in Numbers, Silver Investment provides the next most lucrative option after Gold. Also added the fact that Gold Prices have been on a rampage for the last 11 years & with Silver being mostly on the sidelines with a sole, though an exceptional rally last year to around $50, the time for a sustained Silver Price Rally may just have come. Gold Prices are at their highest levels in India due to the sharp weakening of the INR – Indian Rupee against the US Dollar. Gold trading participation, Investments & Jewelry buying has lowered considerably by a 56% drop in demand in the Indian Markets due to the historically high Gold Prices. Small Investors may in fact go to the extent of selling Gold to invest in larger quantities of Silver. Historically also, Silver follows a common path and responds similarly to its costlier cousin Gold. With higher Inflation expectations due to the dual factors of a severe drought in most countries & Economic stimulus efforts expected to be initiated anytime now on in the U.S. & Eurozone, Gold & Silver Trading or Investment is looked upon as a safe haven & is a natural hedge against Inflation. With lowered levels of risk appetite triggered due to recent meltdowns, traders may look towards Silver more than Gold as an option to hedge. Gold has declined only by a paltry 16% to the present $1620 level from its all time high if $1925 but on the other hand, Silver has slumped almost close to 50% to the present $27.50 levels from its high of $50 seen last year, providing a better opportunity of a faster upside recovery.
Gold futures traded comfortably above the psychological level of $1,600.00 yesterday when the U.S. dollar index came under selling pressure following some fresh, weak U.S.economic data. The Philadelphia Fed business survey was released Thursday morning and it came in weaker than expected. That followed a weak housing starts report for July.
It may simply be the proverbial “Calm before the Storm.” Silver Trading has been stuck in an exceptionally small & a tight range in recent times. This has mostly been due to the fact that markets do not wish to move any more only on Intent or Assurances by Central Banks or Governments of the distressed nations & their relief providers. The markets demand more action to make further sustained movements as only on action would the next direction be clear. But the past few months, especially from May 2012 onward, we have had several meetings & summits but to no positive & constructive outcome. Markets now wait to see if the U.S. Federal Reserve will act to implement another round of quantitative easing of U.S. monetary policy, the QE3. Any such action could occur at the Fed’s Jackson Hole, Wyoming annual gathering in late-August, or at the next meeting of the Fed’s Federal Open Market Committee in September. Markets may again, obviously move on Hope, but now only when these Hopes are more of a concrete nature, hence the directionless small swings due to the prevalent uncertainty. This uncertainty has thinned trading volumes across all platforms further reducing the trading range on lack of trader interest & participation. Future Markets essentially live & survive on Hope, but after having been let down perpetually, are now more prone to evaluate the genuineness & accuracy of these politically motivated intents or announcements.
Crude Oil Prices have shot up above $95.50 from the lows of $78 seen last month & is expected to rise some more with some resistance only around $100. With Oil rising rapidly, the Gold & Silver Rally may not be a very far off event.
Copper & other Base Metals may also rebound from recent slumps to rise substantially on expected easing from China, the world’s largest consumer of Base Metals. There have been reports that Chinese leader Wen Jiabao said China may have to ease monetary policy soon. Copper production in 2012 has picked up, but not to the level that industry expected. Scrap supply has become the savior of the copper market for the past two years, bridging the gap between growing Copper demand and stagnant mine supply. Chilean Copper production is starting to pick up after a shaky start to the year, with a rise of 2.5% in the first half of 2012 in the world’s largest copper-mining country. Chinese Copper production is running higher than expected, growing at 20% year-over-year. Copper Trading remains on the weaker side yet because of the modest global growth seen in the first half of 2012.
Data out of China shows Lead acid battery production rose by 45% year-over-year in July alone and has risen 25% year-to-date. This should be supportive for the Lead market. Battery production represents nearly 70% of total Lead demand in China. Lead supplies have tightened because of the strength of demand, and its likely solid demand will continue into year end.
We remain Bullish on Silver as mentioned several times earlier. Silver momentum may prove to be an out performer, though initially the rally may be triggered by some upside movements by Gold. But once the Silver Rally begins, Gold may relatively remain on the sidelines for some period, watching its currently weaker cousin, Silver rise & shine. MCX Silver Trading for September contracts currently at Rs. 53,880 from yesterday’s low of Rs. 53,385.
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