A quick glance at the kitco charts after NY trading closed last night indicated a cautious day on the stock market floor. Silver wobbled slightly, but investors are still backing gold with one eye on the political and military developments in Ukraine.
Much of the days silver trading was negotiated electronically as physical demand for the white metal has dropped off since silver prices breached the $20 point.
Gold and silver prices are waiting to drop, but the crisis in the Crimea is propping them up for the time being. Last week it did look like tensions were set to ease, but the newly formed Ukraine government and the west are in disagreement.
What is affecting the stock market?
The protests in Ukraine caused European equities to fall, but kept gold and silver afloat and is pushing it upwards. In times of geopolitical and economic tensions gold is backed as a hedge against riskier investments.
Given the political tensions are mounting between Russia and the United States, traders are not prepared to allow gold and silver to fall into their predicted decline. Whilst Vladimir Putin refuses to withdraw troops from the Crimean Peninsula, the West are trying to prevent a referendum amongst the people of Crimea.
The Crimean government has already in favour of returning to Russia, but the newly elected Ukraine government argue they are being put under duress by Putin. Crimea is a strategic military base on the Black Sea and originally part of Russia, but was gifted to Ukraine in 1954 – a decision they are clearly now regretting.
With the global economy showing signs of recovery, once the Ukraine crisis is resolved, silver prices are likely to take a sharp decline, making the white metal price much more attractive to collectors and casual investors who want to but physical silver.
Silver in India
There is less demand around the world for physical silver at the minute, mainly due to import restrictions in India. Since the government introduced a 20 per cent tax on inbound shipments of precious metals, silver imports into India have decline by 71.4%.
Before the levy was imposed in February 2013, India was the world’s largest importer of gold and silver, bring in $5.24bn dollars. In the same month a year later, precious metal imports had fallen to $1.63bn.
US job data released last Friday boosted market sentiment with better than predicted results. Analysts had forecast 140,000 jobs to be added to the non-farm payroll but employers added 175,000. Immediately after the report was published gold and silver plummeted before recovering.
The market trend shown just after the job report figures came in is a good technical signal of the direction gold will go once the political strife is concluded. The Chinese economy is weaker than expected, but traders are keeping faith that the world’s second largest economy will increase its exports.
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