© Nik Kalsi
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In the near term the silver performance will be influenced by the precious metals seasonal cycle. From a seasonality perspective we are moving into a very bearish period for the precious metals in general. Starting from May to July, silver prices tend to sell-off. This trend has lead to the famous saying "Sell in May and go away". Thus, now is certainly not the time to be entering a ‘Buy' position on silver. Moving on, over the second quarter, silver prices will either sell-off or consolidate mostly likely until the beginning of the second-half of the year. From July onwards, it is generally a very bullish period for the Precious Metals as the market enters the Indian festival season, combined with the build-up to the Chinese New Year.
As we have seen over the last several years, silver demand from India and China significantly increases during this time of year, triggering a rally in Precious Metal prices, including silver. On this matter, I foresee prices consolidate or sell-off and, as we move to the second part of the year, prices will likely start to pick up again.
Where do you see the metal by the end of the Q2?
Silver prices continue to face pressure from the strength of the U.S Dollar, and I certainly do not think those fundamentals will change in Q2 of 2015. However, as the Federal Reserve still maintains low interest rates combined with the ongoing uncertain geopolitical landscape across Europe and the Middle East, these factors could potentially provide silver some near-term support. As we discussed the mining sector earlier, we should also take into consideration that, on average, 75% of silver is mined as a by-product of copper, lead and zinc exploration. With that said, if base metal prices continue to decline, that could eventually lead to production cuts, which would be positive for silver prices.
From a technical perspective, silver is currently trading in a strong downtrend, significantly below the 200 Day Moving Average. With the upcoming FOMC meetings, there is a high possibility silver prices could fall as low as $14.00 per ounce, especially if the Federal Reserve drop any hints of a sooner-than-expected rate hike. On the flipside, if silver prices find support in the near-term and manage to rally back above the 200 Day Moving Average, then $18.50 an ounce could be a level prices could climb towards. Overall, in Q2, I would expect silver prices to trade within a range of 14.00 to $18.50 an ounce.