Silver price set for biggest weekly loss since last September
London (Mar 23) Silver is set for its largest weekly drop since last September, falling around 5 percent so far this week. Silver’s meltdown has occurred after gold topped out at just below $1400 an ounce on Monday.
Gold reached a 6-month high of $1391.99 on Monday, after the Crimean people had voted over the weekend in favour of joining the Russian Federation. Since then, bullion prices have turned sharply lower as the conflict in the region has seemingly de-escalated.
In reaction to sanctions imposed by the US on some of his closest allies and advisers, Russian president Vladimir Putin today mocked the measures, saying he will open an account at US-sanctioned Rossiya Bank. During a meeting with the country's senior security officials, he added that Russia won’t introduce a visa regime with Ukraine, even though Kiev is considering the option.
“These people are not rich. They work in Russia to provide for their families. We shouldn’t do this,” Putin emphasized.
Yesterday, the US expanded its sanctions against Russia’s annexation of Crimea by adding 20 more names to the list of sanctioned Russian officials and businessmen. Despite the stand-off in relations between Washington and Moscow, Putin said Russia will continue leading a project to repair helicopters in Afghanistan, which is run by NATO.
The downswing in precious metals has been exacerbated after new Federal Reserve chair Janet Yellen brought forward US rate hike expectations, which has provided a lifeline for the greenback and has effectively reduced the appeal of non-yielding investments like commodities.
But the fate of commodities and precious metal is also closely tied to the Chinese economy, over which worries have been rife. This week Goldman Sachs became the latest investment bank to downgrade its growth forecasts for the country, saying it now sees 2014 growth at 7.3 percent, versus the prior estimate of 7.6 percent. China plays a central role in commodity markets, accounting for much of the increase in global demand over the past decade.
As a result of the convergence of bearish factors, silver has now fully retraced its breakout from 14 February.
“The metal is now sitting back in the range that traded from late November through mid-February, and is poised for further weakness”, opine technical strategists at ScotiaMocatta - the bullion arm of Scotiabank and a market-maker on the London Bullion Exchange. “Resistance is at 20.64, the top of that range, with the target being a test of the bottom at 18.83.”
Right now, silver is trading at around $20.385 an ounce, up 0.07 percent intraday.