Silver and copper prices were once again under sales pressure in yesterday's trading session, with the euro crisis still dragging on market sentiment. Although silver is a precious metal, it is – like palladium and platinum – also an industrial metal, and thus partially tied to the cycles of the world economy. Observers fear that in addition to declining industrial demand for silver, demand for the white metal among major investors could be hit, after the US government’s Commodity Futures Trading Commission (CFTC) introduced new rules to combat commodity speculation on Tuesday.
Weakening global economic growth and intensifying investor worries about the future of the eurozone led to price declines in the base and non-ferrous metals sector again in yesterday's trading session. The silver price was under sales pressure in Asian trading this morning, but held above the psychologically important $30 per ounce mark. The technical conditions on the platinum and palladium charts have significantly deteriorated in the last few days as well. However, both precious metals were able to recover somewhat from their sharp price pullbacks this morning, with palladium dropping down to as low as $580 per ounce and platinum slipping to $1,460 per troy ounce. The short-term direction of precious metal prices remains uncertain.
Following the CFTC’s new moves to limit speculation in commodity markets on Tuesday, copper and silver investors were forced to liquidate positions in both sectors. iShares Silver Trust, one of the largest exchange-traded funds in the silver sector, lost around 3.5% yesterday. The copper price lost close to 5%. The CFTC’s new rules increase position limits and aim at greater transparency in futures and options markets. Many politicians have sought to blame speculators for driving up commodity prices.
Critics say that the demand for commodities from investors in financial markets has nothing to do with the coverage of real needs, but only serves speculation purposes and to “make profits at the expense of society as a whole.” The new rules clearly have hedge funds in mind, with some observers voicing concerns about these funds’ abilities to move markets.