For silver, the past week was depressing, as the metal entered its third week of consecutive declines, despite supply / demand balance looking still positive for the longer term.
Silver has yet to close below its important 100-day moving average, which at present stands just under the $35 mark.
An article in the FT last Friday highlighted how these price swings are possibly being driven by Chinese speculators, primarily in Shanghai, where trading of silver on the local exchange has increased since the start of the year by as much as 3000%.
CPM Group has also come to a similar conclusion as they detail in their Silver Yearbook 2011. For instance, CPM found domestic demand for silver has outpaced supply growth despite China being the third largest producer of mined silver in the world. “China was a net exporter of silver until 2006, but became a net importer in 2007,” CPM noted in their recently published Silver Yearbook 2011. They also note that China’s silver market has increased around 300% since 2000 and they predict Chinese silver fabrication demand to rise by 15.6 percent to 177.2mln ounces this year. This is way above China’s expected silver production of just 104.6mln ounces for 2011.