Precious metals are trading higher today. Spot silver was last quoted at $23.02.
The metals markets continue to be the subject of discussion as they continue to try to “shake off” the selling that has hit them so hard in recent weeks. Silver appears to be building a base around the $23 level.
Thus far, silver has not been able to stage any meaningful rally however, the longer the market is able to trade sideways here the more likely a rally becomes. It would appear at this point in time that a bottom is in place. Silver and gold continue to see excellent physical demand, and that demand is what has allowed the precious metals to stop the bleeding.
It will be interesting to watch silver in the coming weeks following the sell off. Unlike gold, silver has more industrial uses and can be invested in or traded based on its investment value or its economic usage.
So far, the rebound in gold is looking a little more convincing than that of silver. This could perhaps be attributed to the fact that commodity prices have been sliding. Crude oil, grains, and other commodities have seen some decent selling pressure recently. In fact, the term deflation is being thrown around again.
Watching the oil market, or perhaps more importantly the copper market, one may get the sense that prices will continue to fall. Should this be the case, it makes the bull case for silver a little tougher than that of gold.
The silver institute reported on Wednesday that investment in silver rose in 2012 while fabrication demand slid. This would seem to paint of picture of investors buying silver for its investment potential in a world of loose monetary policy, money printing, and debt.
The demand for fabrication, or lack thereof however, would seem to suggest that concerns remain over global economic growth. This is what makes silver interesting to watch here. Thus far, people are continuing to buy the physical metal but at what point may that demand slide should commodities fall further? What will silver prices do in the face of a sell off in equities?
These questions are certainly a matter of opinion, although all the current buying trends would seem to suggest that demand for silver would likely remain quite good even in light of a deflationary environment.
One has to remember that all of the solid reasons for owning physical silver are still in play. Nothing from a fundamental standpoint has changed in the last two weeks. Just as is the case with gold, this could prove to be nothing more than an excellent buying opportunity. Time will tell.