Why Comex Silver futures may have bottomed out

NEW YORK (Aug 4) Silver futures on the Comex at $19 looks to have bottomed out even as the alternating coupling with gold and copper futures happen on and off.

Normally, a dip in gold futures to the tune of 1.85% or more should translate into an outrageous avalanche in silver futures to the tune of some 3-4%. But this has not happened this time around.

This can have two reasons:

Silver in the past two months, coupled with gold has taken decent beating and turned highly volatile.

This was in the context of Ben Bernanke's words being interpreted by the markets for tapering of QE measures. Prior to that, silver, given its industrial use towed the line of copper for a while.

The commodity has go down so much, may be 36% or more y/y to-date. When it hits the bottom and the internal resilience of the commodity returns, it so happens that the prices would refuse to budge, further. This phenomenon is lending enough of support to silver which we are currently witnessing.

Meanwhile, copper futures bearish for the past few days on dismal China data has showed a marginal uptick. With US economy improving, the crude oil futures too are climbing and analysts opine that the positive trend in US economy would continue to cause the futures of gold and to some extent silver to shed weight. But silver may already have stopped taking orders from gold.

The positive economic data from US may have spurted the copper futures a bit in addition to extended short covering also helping copper to trade up.

The spurt in industrial activity in US has the potential to aid a demand side uptick in copper. This may have prevented the downfall in silver from continuing as around 50% of silver mined is used for industrial applications.

In short, the copper-silver coupling may be back! And if the data from US continues to be positive, does not leave the commodity (silver) with ample room to correct further to the downside.