Silver prices have suffered this year as the white metal has lost its luster as a safe haven investment, but the pullback has slowed and may be bottoming out.
Cash has gained some allure over metals, but according to FX Empire
, as bullion prices near support levels buying interest has been on the rise.
In July, silver prices broke out from a three-month price slump and closed up 1.1% to $0.302.This came after fourth months of consecutive losses: 0.5% (June), 10.5% (May), 4.5% (April) and 6.2% (March).
Silver prices ended last week on a positive note, up $0.54 to $27.69. Futures and options players made bullish bets at the end of last week on the commodity based on speculation for additional stimulus from the Federal Reserve.
This week, silver prices have continued their rise. The metal's up 0.3% to $27.84 an ounce.
Can this uptrend continue? Here's what to expect from silver prices in the near term.
Silver Prices to Rally?
For the year-to-date, silver prices are pretty much unchanged.
Last week's central bank policy announcements and U.S. payroll numbers triggered high expectations that news of QE3
would boost silver prices
- but no such announcement was given.
The decision to keep things status quo by both the Federal Reserve and the European Central Bank (ECB) failed to deliver the catalyst for higher silver prices that investors wanted.
But another announced change in the silver market could give the metal a boost.
According to Reuters
, CME Group will cut COMEX silver futures margins to push for an increase in trading amid sluggish prices.
Peter Fung, head of dealing at Wing Fung Precious Metals, told Reuters
, "Overall the market is still very thin as margin cuts are unable to disperse investors' concern about the economic conditions."
The exchange will also decrease NYMEX platinum and palladium margins.
This isn't the first time for the exchange to do this. It's the third time since February the group has tried to spur investor interest. This could help push silver up for a bit, but we may have one final lower push before silver prices take off again.
"As far as the downside targets for the silver futures, I am still potentially expecting a small rally to complete within the next week or two, which can take the futures to either the 28.75 region or as high as the 29.85 region," silver price analyst Avi Gilburt wrote in MarketWatch
Aug. 2. "It is from this region that I will be looking for a decline which can target the 22/23 region for the final move down in the futures, before a potentially parabolic rally were to begin."
Gilburt sees the $30.50 an ounce level as a sign a silver rally is underway.
While silver looks to be volatile before setting on a solid upward drive, European economic uncertainty should provide some fodder for silver prices in the next few weeks.
On Friday, Spain jumped onto the scene to end the week with rumors that its government may indeed seek help from the Eurozone's rescue fund for borrowing costs.
This was quashed by Spain's Prime Minister Mariano Rajoy who said a decision had not been made yet, reported MarketWatch
, but the country will likely need some sort of aid to help its sinking economy.
The Fed will take a backseat to Europe until Bernanke and friends meet again in Jackson Hole, WY later this month. Stimulus news would trigger a metals breakout, but we'll likely have to wait for such measures until after Election 2012. That could push the real silver price rally into 2013.