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Beware of perturbations

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04/26/2013 | 06:05pm

Silver, has recorded a sharp decrease of nearly 20% in two weeks, following the recent collapse of raw materials. Like gold, it seems to gradually lose its attractiveness to investors which prefer massive short term trading on risky assets and especially on stock markets. Thus, quantitative easing measures do not boost anymore precious metals and more fundamentals criteria as economic gloom in China and disappointing European statistics are now taking over.

Very dark period for precious metals! Fears mainly linked to the Chinese economy have literally created a collapse of precious metals, dive that looked like an uncontrolled panic movement. It is a very awaited economic indicator that started the decrease. China, first consumer of most raw materials produced on earth, has indicated that its GDP had progressed by 7.7% at the first quarter, much less than estimated by economists and lower than at the last quarter of 2012. Analysts from Morgan Stanley have pointed out the weakness of the building construction and a fully sluggish industrial production in March.

Now, several questions arise for investors: is it a major reversal of trend after a bullish decade for precious metals? Is this sharp decrease simply a temporary move or rather a completely different asset relocation? Finally, is that collapse linked to a disappointing global economic situation or rather the reflect of a coming end to the crisis? Now it is of course impossible to answer to all these questions and it will be interesting to follow the evolution of investors sentiment in the coming months.

Technically, the trend of silver prices is now highly bearish in daily data below 25/26 dollars, threshold coinciding with the 20-day moving average. In the short term, it seems better to take advantage of the recent slight rebound to take new short positions and aim new lows towards 20 dollars in a first time.

Camille Chretien
© Zonebourse.com 2013
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Silver Technical Analysis Chart | MarketScreener
Duration : Period : Week
Silver Technical Analysis Chart | MarketScreener