Silver Momentum Could Be Extended on Turmoil

Silver, although down from recent highs, is up 9.58 percent since late April.

Bullion.Directory precious metals analysis 25 May, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Twitter @Lemieux_26

Silver prices are hanging onto $17, as traders began to take profit on a monster rally of late. Prior to the pullback on profit taking and recent dollar strength, silver extended it’s gain since April 24 to 12.85 percent.

The silver market is thin and can lead to momentum driven price extensions in either direction; but, silver has outpaced gold, which is been bogged down by interest rate optimism – even as Fed Chair Janet Yellen seemed rather unsure of when a hike would occur.

There is a potential for silver to continue on its rally, as speculators became the most net-long since 1997.

A few potential reasons for this is the fact that the Federal Reserve is still leading the market on. The main attraction to Circus du Fed is the tight rope act.

Yellen has to guide the fragile markets into believing that the economy is strengthening and there is potential for a rate hike, yet she must try and cap market volatility and leave monetary policy accommodating. A hike in interest rates will only strengthen the dollar, furthering deflationary pressures.

Greece is also finding it difficult to resolve any debt repayment problems with SYRIZA refusing to compromise on any reforms. The Greek government said it has no money to repay the the hefty sum of debt, leaving creditors wondering whether or not they will see any of that money again. While failing to negotiate a repayment deal, SYRIZA also wants emergency funds to cover the current funding gap- the equivalent of having your cake and eating it too!

The potential for a Greek default is there. In 1997, the world was gearing up for the implosion of the Russian economy, which occurred in 1998. Declining productivity and increasing fiscal debt caused the central bank of Russia to devalue the ruble, which caused inflation to spike to 84 percent.

Greece is nowhere the size of Russia, but it only takes a singular domino to set off a series of events that could trigger a much bigger issue.

Silver speculation is one of safety. Whether traders are expecting the dollar to decline or ongoing Greek turmoil, the white metal could be supported in the near-future.

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