Silver Monthly Fundamental Forecast October 2012

Outlook and Recommendation

Silver closed a strong month trading at 34.53. This month has been a roller coaster ride for the

 commodities sector. The silver price has received a significant boost with the announcement of the new U.S. Fed policy to resume pumping money into the economy to try and kick start employment recovery.  The gold price has risen by over 9% over the past four weeks that of silver has risen by some 23%, continuing the past pattern of silver tending to rise faster than gold on the upside.  The price rises in both appear to be being driven by large volumes of paper gold and silver traded on COMEX, but is puzzled by the lack of silver deposits into the major silver ETF, SLV.  This, he reckons, could be a sign of tightness in the market.

This could prelude the big short position holders in silver, and in gold, acting to try and take down the market.  and points out that we are at around the anniversary of what he feels was a major take-down in silver last year when it fell $15 – or 35% – in three days.

Silver’s price volatility, for whatever reason, is both an attraction and detraction for potential investors.  But, by and large silver moves up when gold does, but faster, and if the gold price continues to advance again after a period of consolidation, it is difficult to see that silver will not follow suit and exceed gold’s advances.  The gold: silver ratio, for those who follow that particular metric, has come down a little to 51, after around 54 before the latest price rises and this would be expected to fall further should both gold and silver continue to advance.

Bank analysts are also beginning to revise their predictions of year-end gold, and silver, prices upwards following the Bernanke QE3 announcement.  Forecasts of $1900 gold by the year end are now becoming almost commonplace, and suggest a silver price of approaching $40 again should these gold price predictions come about.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name: Fed Reserve

Date of next meeting or last meeting: Sep 13, 2012

Current Rate: 0.00%-0.250%

The Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. Generally speaking, if the Fed is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the USD. The FOMC introduced QE3

Economic events for the month of October affecting EUR, CHF, GBP and USD

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