Silver spot prices remained in the balance with a slight climb of $0.31 an ounce on Friday. A breakdown in talks over Crimea and disappointing economic data from China continues to drive market sentiment towards precious metals.
It was inevitable that the Crimea conflict would rumble on. With the US and Russia in total disagreement over what should happen with the Crimean Peninsula, a conclusion was never going to be reached diplomatically.
The outcome now rests on the referendum that will be held on Sunday given the people of Crimea the chance to join Russia or stay with Ukraine. Given the majority of the population are ethnic Russian, the vote is expected to be in favour of the Soviets.
Precious metal prices
The decision resting in the hand of Crimeans could greatly influence stock markets and the price of precious metals. Much of that however will depend on the reaction of the West.
The Crimean Peninsula is a strategic naval base for Russia, but they only have rights on the territory until 2042 when the lease runs out. Given Crimea officially belongs to Ukraine, Russia could lose their naval stronghold in the future.
The US will therefore be pleased to see a long-term foe lose a defence barrier, and according to former assistant Treasury Secretary Dr. Paul Craig Roberts, the neoconservatives in the US senate are angling for a war to avoid the collapse of the US dollar – which is apparently worthless.
Full-scale military action of course will rattle the equities market and precious metal prices will continue to rise. If the problem escalates further and other countries start getting involved, a break-out of World War 3 will see silver breaking all-time records.
Since the problems arose in Ukraine on 23 January, traders have been nervous and have stuck with the safe-haven of gold and silver rather than equities which showed great promise last week after encouraging economic data from the US.
This week however, numbers coming from China show a slow-down in the Far East and has subsequently stalled the Asian markets. Markets in Eastern Europe have inevitably collapsed although savvy investors will see that as a chance of cashing in on cheap stocks.
A couple of default payments on government bonds in China is raising concerns about the growth of the global economy, and traders are fearful the Republic could be a facing a credit crunch.
What had been expected to be a good year for investors is turning out to be a disaster. The third quarter of 2013 had raised hopes the global economy was strengthening after five years of double-dip recessions, but world events have twisted market sentiment.
Silver spot prices will continue to rise until the geopolitical differences are resolved and the Chinese economy shows signs of improvement. Given the fragile state of a world financed by credit and geopolitical differences, investing in precious metals may be the only choice of protecting your financial future.