December 11th Silver Market Update

Precious metals have had an interesting week thus far, and as of now, it is looking like this trading session just might be one of gains for both gold and silver. To begin the week on Monday and Tuesday, precious metals’ spot values spiked and moved upward by considerable margins. Of course, after massive gains on Tuesday, the marketplace was mostly expecting that a corrective pullback and profit-taking would drive spot values down once more. To everyone’s surprise, however, Wednesday came and went and though metals didn’t add to the previous days’ gains, they mostly held their positions. As of the writing of this post on Thursday, gold and silver are conceding a little bit of value, but are only making a tiny dent in the gains made earlier this week.

As we look ahead to the final day of the week, I imagine that the focus of investors will remain fixated upon world equity markets as well as the price movement of crude oil. Recently, an explanation was offered for why crude oil is continuing to hover at multi-year lows, and that explanation delved into why crude oil may remain at current levels for some time to come.

Massive Supply of Oil Drags Prices Downward

For yet another week, the spot value of crude oil is hovering around a 4-5 year low. While the price of the precious commodity has been falling for the better part of a month now, it is becoming worrisome to a select number of investors that oil has not bounced back after taking such a beating. In an article published this week, market analysts and experts agree that a recent increase in the supply of US-extracted crude oil hitting the market is playing a major role in the downward trend of oil prices.

In addition to there simply being more oil available to satisfy the same demand, US-extracted crude oil does not carry what is known as a “war premium.” For those who are unaware, a so-called “war premium” is the term used to explain the up to 25% price increase tacked on to a barrel of oil originating from somewhere where war is happening, or where war is a strong possibility. Becuase the US has not played host to an all-out ground war for quite some time now, the oil from there is less costly and less dangerous to acquire. If the United States continues to produce oil at the rate by which they are doing it now, the crude oil market may stay subdued for quite some time.

Fortunately, this week saw gold and silver finally break away from the downward pull of crude oil. As investors grow increasingly worried about the possibility of a global economic slowdown, safe-haven demand for gold and silver is beginning to spike. The growing demand coupled with the fact that prices are at bargain levels probably explains why spot values have spiked this week. It will be interesting to see if gold and silver can hang on and post a weekly gain, or if we are in for another Friday of losses.

Posted in News

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