Will Silver Prices Keep Falling?

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As gold prices plummeted $200 in two days, silver prices fell about 14%, or $4, to below $24 an ounce.

Our Money Morning resources expert Peter Krauth explained the reasons behind gold's fall, so we went back to him to find out the deal with silver prices. Will silver keep falling? Is it a buy at the lower levels?

Here's what Krauth offered for investors.

Money Morning Staff: Peter, are silver prices falling because gold fell, or are there other factors at play here?

Peter Krauth: There are two factors.The first is that silver follows gold rather closely, and usually amplifies its behavior, both up and down. However, it can and does sometimes detach from gold and behave independently, but this is more of a rarity.

The second is silver's industrial demand.

I believe is a factor that I think does affect the silver price in the current environment. Silver does have more industrial uses than gold, so there are some different price drivers.

While silver's industrial demand will help support the price, the recent selloff likely is in sympathy with the lower-than-expected Chinese gross domestic product (GDP) growth which, for the first quarter this year, came in slightly below at 7.7% rather than the expect 8%.

MM: For anyone interested in investing in silver now that the price has fallen to lower levels, what's a better buy: physical silver, or silver-related stocks?

Krauth: I'd recommend both. Buy physical silver to establish a lower risk base position. Then investors can augment that position by buying quality silver stocks that offer considerable leverage to the silver price.

MM: The CME Group, the parent company of the main metals and energy exchanges in the United States, changed on Monday the gold and silver margins by 19% and 18%, respectively. What effect will this have on further gold and silver price movements?

Krauth: I think that raising margins right now will simply provide additional headwinds to immediate gold and silver price gains.It could help push both precious metals somewhat lower in the short term, since futures buyers/owners will have to put up higher amounts to control the same quantity of gold and silver than previously. But over time I expect the effect to diminish, and those margins are likely to come down again.

Final Note from Krauth: One other thing I'd like to address is that throughout this selloff, I mean going back the last few months, we've seen very strong silver coin buying.

The U.S. Mint has sold 2.22 million ounces so far in April, which is on pace to exceed the 3.37 million and 3.36 million in March.So far this year, sales have reached 16.44 million, easily outpacing the 11.66 million for the first four months of last year.

It's very telling that even with falling silver prices, people are stepping up their buying.And the premiums are high around $4 per American Silver Eagle, indicating very limited supply.

My take is they're seeing better value as the price falls.

For more information on all the factors at play with silver prices, as well as info on how to buy physical silver, check out this special Money Morning interview with local precious-metals dealer Rich Checkan.

Join the conversation. Click here to jump to comments…

  1. Arnold Zimmerman | April 17, 2013

    Where can you buy silver safely and at the right price? I do not want to pay a high in cost.

    • Robert in Canada | April 17, 2013

      You can buy pure silver coins directly on the Canadian Mint website. Made by the Canadian Mint and guaranteed by the gov't of Canada.

      • bart kitover | April 17, 2013

        where can I buy silver at market prices and delivered with the smallest fees

    • IAN FALKINGHAM | April 18, 2013

      I've been buying silver bullion on dips at Bullionvault.com, so it would be worthwhile you checking it out.

    • David | May 29, 2013

      I don't know where to buy silver, now that the spot price is at the lower $20 range! I can't find anybody that sells silver at a lower price anyway! I hate to pay the same high prices that I've always paid! Where could I try? David T. Chavez

  2. GARY WEIMERSKIRCH | April 17, 2013

    I BOUGHT BOULLION @ 45.00.PER OUNCE!!! only 1 bar,IS IT CATCH UP NOW??? I FEEL 2 MORE BARS WOULD WORK,EXCEPT THE FEES VARY QUITE A BIT. KNOW A PLACE TO BUY FOR.50 PER OUNCE??

  3. Phil Hotz | April 23, 2013

    Sivr is a stock symbol I Like. Its an sharebuilder or something set up anaccount an buy. etf go on

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