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Barring a big surge later in the day, silver prices are likely to finish down on the week for the first time since the last week of May.
The recent silver price rally has been the longest of the year, sustaining six weeks of gains for a 14.4% growth in prices. Silver was trading at $18.80 per ounce at the start of June, and closed out the six-week rally at $21.50.
There were some quick gains late in the week, as investors sought shelter from geopolitical unrest and a more than 160 point drop in the Dow Jones Industrial Average. But they weren't enough to recoup a 3.5% drop that opened the week.
Silver's biggest lift came yesterday (Thursday) on news that a Malaysian Boeing 777, en route to Kuala Lumpur from Amsterdam, was downed at the Ukrainian-Russian border, killing 298 passengers while the culprit still remains unknown. Add to that Israel's invasion of the Gaza Strip, triggered by a breakdown of ceasefire talks between Israelis and Palestinians, and the cumulative effect spooked investors. Silver, which along with other precious metals is a safe-haven investment in times of uncertainty, climbed as high as $21.30 an ounce.
On the day yesterday, it closed up at $21.20, up 1.8%.
However, it was trading down at $20.75 as of 12 p.m. EDT today (Friday), as the major indices began to rebound from their big losses yesterday.
Silver's Unprecedented Summer Rally
This six-week rally has been a departure from the historic pattern for silver prices. Generally, as markets move into the slower summer months, trading volume stagnates and the prices stall out. But as silver began to trade at its lows on the year going into June – below $19 – the futures traders took note. A heavy volume of short positions were closed and investors began buying long to help give silver a boost.
It sustained this initial jump after the U.S. Federal Reserve met for its Federal Open Market Committee (FOMC) meeting later in the month. Following the meeting, Fed Chairwoman Janet Yellen struck a muted tone on inflation and indicated that the Fed's policy of near-zero interest rates was going to be pursued for a considerable period. Because low interest rates are a stimulative monetary policy, a prolonged period of low rates has the potential to accelerate inflation, and silver is considered a hedging instrument against a weakening dollar.
Silver prices rode this momentum well into last week, and while trading volume began to slow and prices were sliding, likely a sign of profit-taking at the new highs and the onset of the summer doldrums, panic over the Portuguese banking system provided another lift to silver prices.