By Michelle Smith — Exclusive to Silver Investing News
The Shanghai Gold exchange increased margin requirements, but as with COMEX silver margin decreases, the changes appear to have had little immediate effect. Silver seems to be nestling further into its physical commodity personality lately and is showing it by reacting to news that has implications for its industrial demand. And given the economic environment, there is a growing camp that believes the bears could be set to gain ground.
A prime example of silver trading like classic physical commodities is the severe negative reaction the metal had to Flash PMI manufacturing data that showed weakness in Europe and China. This news prompted a terrible start to the week as prices on Monday fell to the lowest levels seen since January 20. Europe paved a more positive path for silver on Tuesday. Debt auctions in Spain, Italy, and the Netherlands occurred with no negative signals sent to the markets, and European equities strengthened. North America seemed to catch a whiff of the improved market sentiment and silver started out the day trading up. A portion of Tuesday's gains, however, were attributed to short covering prompted by the previous day's price decline. Silver miners were caught up in the negative sentiment seen on Monday. At 5:10pm PST, of the silver mining equities tracked by Kitco, the fifth in the top five was in the red, down 0.62 percent. But, this picture also appeared to improve Tuesday, with silver mining equities showing mixed performance that continued to improve later into the week. The silver market is still considered highly sensitive to quantitative easing developments. Market participants should have been expecting some volatility in prices ahead of this week's two-day Federal Open Market Committee meeting. By the closing day, Wednesday, it was revealed that the majority of members were in favor of holding off on a rate increase until 2014, that most voted to keep current easing measures in place, and there was an acknowledgment that higher crude and gas prices had resulted in some rising inflation. The release of such statements could have viewed as bullish for silver, but resulted in COMEX May silver falling below $30. However, in a press conference that followed, Chairman Ben Bernanke came to the rescue and gave the market what it wanted: a statement about future QE.