Why Silver Prices Are Down Today

New York (Aug 18)  Silver prices took a sharp plunge today (Tuesday) after Chinese stocks saw their steepest sell-off in nearly a month.

At 1:30 p.m. this afternoon, the silver price was down 3.22% and trading at $14.81 per 5,000 troy ounces – the amount traded on each futures contract equal to about 155,000 grams. Silver futures have gained 0.4% in August but have fallen 3.4% in the last week alone.

The main reason why silver prices are down today is China's struggling stock market. The country's benchmark Shanghai Composite Index cratered 6.2% this morning, marking the index's biggest one-day decline since falling 8.5% on July 27. The drop came one week after China devalued its yuan currency in a desperate attempt to reinvigorate the country's exports.

Like most other commodities, silver is traded in U.S. dollars. That means the metal becomes more expensive for Chinese buyers when the dollar is stronger than the yuan.

"Concerns that China's stock market rout could destabilize its economy in transition and impact resource demand continues to drag on commodities," said Colin Cieszynski, chief market strategist at CMC Markets, in a note.

Unfortunately, silver prices may head lower due to the extreme volatility in Chinese markets. The same goes for gold prices, which are down 5.9% this year.

But according to Money Morning Resource Specialist Peter Krauth, silver is headed for a strong rebound over the next six to 12 months thanks to its increasing industrial demand.

"Thanks to silver's distinctive properties like malleability, ductility, conductivity, light reflectance, and antibacterial attributes, silver is often difficult, if not impossible to substitute," Krauth explained.

"New applications for silver are discovered almost daily, contributing to ever-higher consumption."

Source: MoneyMorning