S ilver's decline continued this week. Instead of struggling to stay above $34, the metal has sunk to below $33.
“Bulls are in trouble and need to show fresh power soon to avoid serious near-term technical damage being inflicted,” Jim Wyckoff of Kitco wrote in a market note Monday.
Silver saw a sharp pullback on the first day of trading. The metal touched a one-month low of $32.53 and closed down $0.78 at $32.70 on the New York spot market. Silver tried to pull off a comeback Tuesday and was able to end the US trading day with gains of $0.26. But it was not until Wednesday that the metal was able to post a close above $33; it ended the day at $33.20, up $0.24.Positive US data is acting as a source of pressure on the weakening silver market. Reports detailing stronger-than-expected consumer confidence and an increase in housing starts have weighed on the metal. These developments are generating concern about the longevity of Federal Reserve easing. Some market participants are worried that the US central bank will plug the flow of cheap money sooner rather than later if the economy continues to improve. Furthermore, positive data boosts the greenback, which is negative for the euro, crude, gold and silver. Europe is also playing a role in pressuring the white metal. On Wednesday, the euro hit a one-month high versus the dollar as the markets reacted positively to Moody's' decision not to downgrade Spain's credit rating to junk status. There was also widespread speculation that Spain is moving closer to asking for a bailout, which has been interpreted as another positive. A day later, the dollar was once again rising against the euro. The euro declined as European leaders began a two-day summit. French and German leaders headed into it at odds on a range of economic policy issues, including the amount of centralized authority that should be granted over national budgets. Market watchers are skeptical that anything meaningful will come out of the meeting.