When silver snapped its three-day losing streak Tuesday with $0.17 in gains, the price was $31.12. Wednesday's losses of $0.34 dragged the metal back to $30.78, highlighting a challenge silver has faced this week: keeping its head above $31.
Some weakness in the silver market was to be expected given the week long Lunar New Year holiday in China and the closure of other Asian markets. Other market participants are also believed to be playing the sidelines ahead of this weekend's G20 meeting where the potential for a currency war is expected to be a prominent topic.
Also weighing on silver is the current market sentiment. As noted last week, questions emerged about the meaning of diverging silver and gold prices. Some thought it may be an indication that silver was now taking the route of physical commodities.Monday CME Group said silver's sloppy performance last week in the face of persistent gains in US equities seems to suggest that this is not the case. “Silver and gold both appear to remain in a partial safe haven liquidation bias and it could take renewed eurozone turmoil, soft scheduled data, or steep declines in equities to provide the market with fresh buying interest,” CME Group said. This fell in line with the comments from a number of other market participants. Deeming silver likely to follow gold and forecasting price weakness for both, INTL FCStone commodities consultant Edward Meir, said “the main drag on gold prices at this particular juncture is the fact that we are seeing money move into industrial metals, corporate bonds, sovereign paper and equities, leaving much less of the investment pie available for gold and silver.” Likewise, UBS lowered its one month gold forecast and since the firm expects silver to be the yellow metal's follower the one month silver forecast was also lowered to $33.