Silver declined for the 5th consecutive week, as precious metals and commodities in general decreased in values on broader based risk-off sentiment.
“Silver fundamentals remain weak and heavily dependent on investor interest to plug the gap,” indicates a research note by Barclays Capital. The technical side of silver suggests there is still room for silver to fall further as it records lower lows on the weekly chart. Some analysts even go so far as to suggest silver was in a bubble, which still has a chance of bursting again before returning to the mean having fallen below a trend line from August in 2010. These market observers predict silver will fall below $30, in the near – term, before regaining its natural appreciation.
From another point of view, alternative energies may help boost demand for silver in the coming years. Solar energy is taking off across the world. As silver is consumed in solar production and other industrial means, the price for silver will surely continue to rise.
According to Sprott Asset Management, the current setup is extremely bullish for silver, as short sellers seized the opportunity to reduce their “liabilities” by buying up contracts in early May at a 30% discount, while the remaining longs term investors do not seem willing to part with their silverholdings at these prices.
However, the reality remains that inflationary pressures will likely drive future silver prices in the short term, yet other factors can drive silver prices on the upside…