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Silver prices this week dipped below $19 for the first time in three months, but the factors suppressing price gains in this current bear session have just about run their course.
At market close yesterday (Thursday), the white metal was trading at $19.055 an ounce and even touched on $18.99 briefly. Silver prices were down $0.405 following the Labor Day weekend, a 2.1% decline. And on the year, silver has fallen $0.51, or 2.6%.
Silver futures – contracts promising the delivery of silver on a set date at a determined price – closed at $19.14 an ounce yesterday, down 1.8% on the week and 1.9% on the year.
There was further trouble in other silver investments. The iShares Silver Trust (NYSE Arca: SLV), the largest silver-backed exchange-traded fund (ETF), which holds physical silver bullion in London and New York vaults, was down 2.1% on the week, trading at $18.32 as of yesterday's close. The ETFS Silver Trust (NYSE Arca: SIVR), a close substitute to SLV, has fallen 2% on the week as well.
Even silver stocks weren't immune to the silver market's current malaise. Key silver mining companies saw their shares take a dive this week, with Pan American Silver Corp. (Nasdaq: PAAS) falling 6.4% and Silver Wheaton Corp. (NYSE: SLW) down 4.2%.
It may seem like silver prices this week (and, by extension, other silver investments) are in the doldrums, but there is a light at the end of the tunnel.
Here's why it's time to be bullish on silver, even while prices have been falling…
Encouraging Signs for Silver
One of the most encouraging signals that silver is ready to reverse this downtrend is the activity of the big money investors.
While ETFs shed 1.2 million ounces of physical silver in July, according to data from Thomson Reuters GFMS, as prices fell 2.8%, the story was much different in August.
Prices fell 4.5% last month, but ETFs added 8.9 million ounces of the white metal to their holdings.
To put that number in perspective, for the first seven months of 2014, ETFs netted only 6 million ounces in their portfolios.
So what prompted this buying spree?