Silver prices fell into a bear market as signs of a manufacturing slowdown in the U.S. and China, the world’s top consumers, spurred concern that metals demand will ebb.
A U.S. factory index fell more than expected last month, and a gauge of Chinese manufacturing showed expansion was slower than analysts forecast, separate reports showed today. Silver imports into the Asian nation fell the most in two years in February, the fifth decline in six months, the latest customs data show. Industrial demand accounts for about 56 percent of global silver fabrication, which also includes the metal’s use in jewelry and coins, according to Barclays Plc.
Prices slumped 6.3 percent last quarter, a second straight decline, on slowing economic growth in China and concern that the Federal Reserve will trim its stimulus program. The metal reached a 31-year high of $49.845 an ounce in April 2011 as global central banks expanded their balance sheets, boosting the precious metal’s appeal as an inflation hedge.
“Silver has taken it on the chin,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “China slowdown worries and fear of stimulus measures ending in the U.S. have worked against silver.”
On the Comex in New York, silver futures for May delivery fell 1.3 percent to settle at $27.944. The price is down 20 percent from a close of $35.101 on Oct. 4, meeting the definition used by some investors to identify a bear market.
The metal earlier dropped to $27.81, the lowest for a most-active contract since Aug. 16.
“Silver will have a lackluster year as industrial demand is not showing huge signs of improvement,” Rohit Savant, an analyst at CPM Group Inc., said in a telephone interview in New York today. “Also, the safe-haven premium has diminished.”
Hedge funds and other large speculators reduced their bets on a silver rally by 77 percent in the week ended March 26 to 632 futures and options, the lowest since September 2007, government data show. Inventories monitored by the Comex on March 26 reached the highest since August 1997. Sales of American Eagle silver coins by the U.S. Mint have declined for two straight months.
“A lack of momentum in the precious-metals market is driving silver down,” said David Christensen, who oversees $500 million of assets as chief executive officer of ASA Ltd., a San Mateo, California-based company that invests in precious-metal companies.