The silver market is under pressure once again today, as stocks, oil and the dollar are also lower.
Silver saw significant selling yesterday as concerns about the health of the Chinese economy likely took a significant toll and as sell stops were triggered.
Silver broke prior support around the $15.50 level, a level which the market had held and bounced from back in March. This break likely triggered a large amount of sell stops which only intensified the selling. The breakdown appeared to take place on some significant volume, with silver prices dropping rapidly before making a low around $14.62.
Silver made a low around the $14.10 level in December of 2014, and may potentially be headed for another test of this area. The technical picture for silver appears quite poor right now. Unless a very large and rapid bounce is seen from current levels, the longer-term time frame charts suggest that silver could potentially head all the way down to the $10 per ounce level — a level not seen since 2008.
Silver may, however, also potentially benefit from increasing demand at current levels. In fact, the U.S. Mint reported that it sold out of American Eagle silver coins yesterday. The mint stated that it believes sales of the popular coin will resume in about two weeks. This strong demand has not only depleted the mint’s inventories, but has also caused the coin’s premium to rise by almost $1.
The mint’s data showed it has sold 1.6 million coins in the first week of July, while sales for last month increased by 100 percent over sales for May.
Clearly, demand for silver coinage and bars is quite strong, and this strength could potentially prevent a further meltdown in prices.
The ongoing Greek saga may also serve as a degree of support for silver, although markets have thus far been relatively calm — all things considered.
Perhaps China and recent weakness seen in Chinese stocks is playing a larger role in silver’s current downside. Beijing has taken several measures this week in order to prevent a larger equity market crash following rapid losses of almost 30 percent in Chinese stocks. Concerns over China and its economic growth may be weighing on silver and the commodity complex in general. As the world’s second largest economy, and one of the biggest consumers of commodities, China has a large influence on the commodity sector.
Additional selling in Chinese equities, or poor data coming out of China may further aggravate the selling in stocks, as well as commodities.