Catalysts Send Silver Prices Deservedly Higher
It looks like silver’s unwarranted hibernation could be over. In mid-September I wrote that there were a number of fundamental and technical catalysts that could propel silver prices higher. I wasn’t expecting a 400% gain or anything unattainable like that, but a solid rebound.
And it’s happening.
Wall Street has been out of touch with what’s going on for ages. But with more and more negative data rolling in, retail investors are starting to make up their own minds on the economy. It isn’t pretty. And precious metals like silver are on the move.
After three consecutive years of declines, it looked like silver prices were going to make it a record fourth year in 2015. Silver prices started the year at $15.73 per ounce. At the beginning of October, they were at a six-year low near $14.50 per ounce for a year-to-date decline of 8.5%.
All that changed, though. As of today (October 8th), silver prices have exploded for a fourth consecutive day, up 11.18% at $16.05 per ounce. Silver prices have reversed losses since mid-June and are trading above their 50-day and 200-day moving averages.
Silver Soars Along With U.S. Trade Deficit
Silver has been outpacing gold as the U.S. dollar weakens after the U.S. trade deficit soared to its worst level in seven years. According to the Commerce Department, U.S. exports were hammered by a slumping global economy and rising imports from China. The trade deficit swelled 15.6% to $48.3 billion in August, the widest gap since August 2008. (Source: U.S. International Trade in Goods and Services August 2015, bea.gov, October 6, 2015.)
The data underscores the U.S. economic vulnerability to a strong dollar and weak foreign demand. As the size of the trade gap rises, domestic growth now falls on the shoulders of financially stressed American consumers.
Wall Street and Federal Chair Janet Yellen both erroneously presumed that the U.S. economy was strong enough to shrug off the global economic slowdown abroad and could shoulder an interest-rate hike.
But this clearly isn’t the case. The case was strengthened last week with the sharp slowdown in employment growth in August and September. Only 142,000 jobs were added in September. Analysts had expected a figure around 201,000. In August, only 136,000 jobs were created from a previously revised lower forecast of 173,000. Since May, fewer and fewer jobs have been created. (Source: Employment Situation Summary, bls.gov, October 8, 2015.)
If there’s one thing investors don’t like, it’s uncertainty. There is plenty of that out there right now. Whether for the short-term or long-term, precious metals like silver and gold are a great way to diversify your portfolio against market volatility.
Market volatility is just getting warmed up. So too are silver prices.