On the week, the prices of the metals didn’t move all that much. However, the move around 6am (Arizona time) on Thursday is notable. The price of silver spiked up from around $15.12 to $15.64—3.4%—by around 8am. Twelve hours later, the price touched $15.73 before sliding off. We are always interested in the fundamentals, as we watch price moves. The question is always: is this speculators, betting with leverage on the silver price using futures? Or is it industrial or stacker demand for real metal?
One coincidence that may suggest the answer to the question for Thursday’s move is that the euro began a move of its own at the same time. From a low of $1.082, the euro hit $1.122 around four hours later—3.7%.
During the same exact time of this move in the euro, S&P futures had a large move of their own. First, the index fell from 2009 to 1968, a drop of 2%. By the end of Friday, it had surged to 2022—2.7%.
Also at the same time on Thursday, crude oil futures (West Texas Intermediate) dropped 3.3%. Then over the rest of the day, it ran up 4.4%.
Of course, this is just the collateral damage from ECB President Mario Draghi’s announcement. He promised an even deeper negative deposit rate plus an increase in the quantitative easing program. He also hinted that further interest rate cuts may not be forthcoming (we don’t believe that Draghi, or Yellen for that matter, has ended or can end the megatrend of falling interest). Draghi actually felt obliged to say, “We have shown we are not short on ammunition.”
What a confidence-squandering announcement from the central bank. Perhaps it precipitated a lack of confidence in paper currency? And perhaps that in turn caused silver monetary reservation demand to swell?
Maybe. Read on for the only true picture of the gold and silver supply and demand fundamentals…
But first, here’s the graph of the metals’ prices.
The Prices of Gold and Silver
