Many of our customers were shocked to see the price of silver drop recently from nearly $50 an ounce to its current level of just over $35 an ounce. They are seeking answers to this precipitous fall considering that many financial analysts and experts in the hard money field have recommended silver as one of the best investment options available today. We’ll attempt to answer the question of what caused the price of silver to fall in this article.
First and foremost, nothing tends to go up forever, and since silver has been setting new 30 year highs since January, it was due for a pullback. Silver was as low as $26 per ounce in January of this year, making the year’s performance through the end of April nearly unprecedented. In other words, a pullback was inevitable sooner or later.
Secondly, the dollar has strengthened slightly versus other currencies, which tends to have a negative effect on commodities. While silver and gold are viewed by many individuals as money, the fact of the matter is that precious metals also have a number of industrial uses, thus making them susceptible to overall changes in the commodities market. Many suspect that the European Central Bank’s (ECB’s) recent position of maintaining current interest rates, as opposed to increasing them, has helped to bolster the dollar.
Thirdly, and this is somewhat related to our second point, we’re starting to see a slowdown in the U.S. and Chinese economies. The most recent unemployment figures released in the U.S. surprised economists on the downside, questioning whether or not we’re really in a sustained recovery. Furthermore, recent quarterly growth figures coming out of China reveal that the economy is starting to cool. While this is having negative short term effects on silver, a slowdown coupled with future Federal Reserve quantitative easing programs should eventually result in a rebound of silver prices.
Lastly, while the unexpected death of Osama bin Laden may have temporarily helped to support a stronger dollar, the fact of the matter is that gold and silver prices began their descent prior to this announcement.
In conclusion, a number of factors have contributed to the recent decline in silver prices; however, our recommendation is not to make any knee jerks reactions. If you were lucky enough to purchase silver over a year ago, you’ve likely realized a sizable appreciation in your investment and should still consider selling and locking in a substantial profit. If you’ve been buying and the fundamentals driving your decision have not changed, use pullback in silver prices as an opportunity to buy at a discount.
Atlanta Gold and Coin Buyers hopes that you’ve found the aforementioned information helpful and that you’ll consider contacting us for all of your silver coin and bullion needs. We can be reached at 404-236-9744 or via e-mail at sales@atlantagoldandcoin.com.
