Mineweb reported yesterday that according to France’s Natixis SA (EPA:KN), the 12-percent uptick that silver has seen this month is not likely to continue.
That’s because though tapering has begun in the United States, “monetary conditions remain extremely lax,” as well as because US bond yields have been sinking since January while the dollar has been weakening since the beginning of the month.
As quoted in the market news:
‘Both of these factors reaffirm the abundance of global liquidity, and help to explain the appreciation in precious metal prices since the beginning of the year,’ Natixis writes, before adding, ‘To the extent to which lower US interest rates and a weaker dollar are associated with a weakening in the US economy, we would expect US economic data to improve as we move beyond the current bout of extreme weather which has dampened economic activity since December. This should help to raise US interest rates and strengthen the dollar, both of which would be negative for gold and silver prices.’
And, because moves in silver tend to magnify those in gold, the bank says there are additional downside risks to silver – especially given the amount of silver now held in physically backed exchange traded funds.