In the month of July, silver prices witnessed a consolidation phase as the industrial demand for silver remains weak and thus the price has also failed to deliver on high hopes; the price has rather followed the yellow metal’s southwards movement, After establishing a life time high of $19.45/oz on June 21, the metal showed violent descending movements.

In fact, silver had slightly underperformed gold, down more than 6.5% from the beginning of the month, in comparison to a 5.6% fall in gold during the same period; this was the reason why gold and silver ratio increased from 66.68 to 67.34 in the month. Silver also finds its use as an industrial metal and because Chinese manufacturing sector is facing slowdown, it is likely to affect its prices.

Markets may be weighed down by the dollar, which has been deteriorating during the past one and a half month. Overall, a weaker dollar may push silver prices higher. The problems of heavy sovereign debt levels and a struggling global economy could make silver and gold attractive because they are tangible assets rather than paper assets, and there is no counterparty risk

In the near future, silver prices are not looking as weak as the gold prices are, and could revert back after facing a healthy correction. After a weak start, Silver consolidated in a narrow range for the entire month of July. Market tracked a lackluster movement in gold, but remained supported by strengthening base metals. As we approach August, another lull month for precious metals, one can take note of the support levels.

If silver is to breach the crucial support of Rs.28000/kg during the month, some sharp downward momentum should surge in. One needs to remember that the metal has been consolidating in a range of 28000­30000 since May and a breakout in either direction should be anticipated soon.

Courtesy: Religare Commodities

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