Silver Monthly Recap for April, 2012: Is Silver Set to Dip Below $30?

Apple CEO Tim Cook (left) with the late Steve Jobs. It was Apple that moved the market in April.

April was another tough month for silver, as it underperformed most other asset classes for the month. Gold was also down for the month, as were the S&P 500 and the Nasdaq. The Dow Jones Industrial Average posted gains of just 0.1% in April, and it was actually the dollar that was strongest, gaining 0.76% against the euro.

No, this is not an April Fool’s joke.

Week 1

The month opened as a bullish one for stocks, as the S&P 500, Dow Jones Industrial Average, and Nasdaq each posted gains on April 2 – it would be the only day that week they’d all be in the black. The Nasdaq did manage an 0.4% gain on Thursday, the last trading day of the holiday-shortened week, but still lost 0.36% for the week. The S&P and Dow fared worse, with the former losing 0.74% and the latter losing 1.15%.

Gold suffered a 1.89% loss for the week, closing at $1,631 per ounce. Silver was hit harder, giving up 3.58% for the week, closing at $31.27. On April 4 and 5, silver posted painful consecutive losses of 3% and 2.22%. Meanwhile, the dollar improved against the euro Monday through Thursday, and gave back just 0.18% on Good Friday, posting an amazing 1.89% gain against the euro for the week. This could be explained away by a weak euro, but with stocks and precious metals down across the board, the greenback has to begrudgingly be given its due here.

What moved the market this first week of April? Well, on Monday, when stocks were up across the board and gold gained nearly 1% (silver lost a penny that day), it was bad manufacturing data that spurred the gains. How so? Because traders thought the weak data would encourage more economic stimulus from the Fed! This truly demonstrates the zombified nature of our economy: bad news is good news because it can prompt government action to artificially inflate the economy. But when the Fed’s meeting minutes were released on Tuesday, showing a reluctance to engage in more stimulus, this is when stocks suffered and the dollar strengthened.

Week 2

The second week was a brutal one for stocks, but a great one for precious metals. The S&P 500 began the week with consecutive losses of 1.14% and 1.71%. The Dow Jones Industrial Average posted a 1% loss on Monday, and a 1.65% loss on Tuesday. Not to be left out, the tech-heavy Nasdaq posted consecutive losses of 1.08% and 1.83% to begin the week. Meanwhile, the London Fix market for precious metals was closed on Monday in observance of Easter, but gold and silver both posted gains when the market reopened on Tuesday: 0.8% for gold and 0.9% for silver.

Wednesday saw stocks rebound a bit, with the S&P, Dow, and Nasdaq posting respective gains of 0.74%, 0.7%, and 0.84%. Gold and silver were up, too, gaining 0.85% and 0.48%, respectively. The dollar was down. Then on Thursday, stocks posted huge gains, with the S&P leaping by 1.38%, the Dow by 1.41%, and the Nasdaq by 1.3%. Gold still managed a 0.63% gain, while silver lost 0.73%. The dollar fell by 0.64% – its biggest loss of the whole month – to 0.7583 euros.

On Friday, the stock market returned to the bearishness of earlier in the week. The S&P 500 fell by 1.25%, the Dow by 1.05%, and the Nasdaq by 1.45%. Gold was down $2 per ounce, or 0.12%, but silver surged by 2.84% – its biggest intraday gain of the entire month. The dollar also leapt by the largest amount it did all month, 0.88%. Obviously, this seesawing volatility of the USD provided a lot of opportunities for forex traders.

Week 3

The week of April 16 was mixed, but largely bearish. The S&P 500 managed a 0.6% gain, while the blue-chip Dow posted an impressive 1.4% gain. The Nasdaq, by contrast, suffered a 0.3% loss. Precious metals were hit hard, with gold losing 1.5% and silver falling by 1.78% for the week. The dollar, too, was down, losing 1.08% against the euro.

A lot of the above doesn’t make a whole lot of sense. When the Dow outperforms the Nasdaq – especially with one posting a gain and the other posting a loss – it normally signals a “flight to safety” among investors. Thus, one would expect gains in either gold or the dollar, if not both. After all, cash is safer than stocks, and precious metals are safer than cash. This just goes to show that sometimes conventional rules do not apply – especially to an economy drunk on fiat money.

Week 4

Apple CEO Tim Cook (left) with the late Steve Jobs. It was Apple that moved the market in April.

The previous week, everything was looking bearish. Normally, when a market converts from a bear one to a bull one, it is the tech-heavy Nasdaq that leads the way, not the Dow. But once again, conventional wisdom was turned on its head, as stocks posted huge gains for the week of April 23 through 27.

Things didn’t start off looking so bullish. On Monday, the S&P 500 lost 0.84%, the Dow lost 0.78%, and the Nasdaq lost 1%. The Nasdaq continued to trail on Tuesday, losing 0.3%, while the other major indices posted gains. However, the tech-heavy index surged by 2.3% on Wednesday, and finished the week with gains of 0.69% and 0.61%, for a +2.29% week. The S&P gained 1.8% for the week, and the Dow gained 1.53%. Gold and silver diverged from one another here, with gold gaining 1.34% for the week, and silver losing 2.04% – and that’s after a 1.43% gain on Friday. The dollar lost 0.24% against the euro.

What moved the market? Mostly, blowout numbers from tech giant Apple. By the end of the week, the three major stock averages all closed above important thresholds: 1,400 for the S&P; 13,000 for the Dow; and 3,000 for the Nasdaq. On Monday of the week, they were all below those key markers and things were looking decidedly bearish. Leave it to the Ghost of Steve Jobs to save the day.

Conclusion

The final day of the month fell on the following Monday. The S&P 500 closed down 0.39% at 1,397.91. The Dow was also down, losing 0.11% to close at 13,213.63. The Nasdaq suffered the biggest loss: 0.74%, closing at 3,046.36. Gold also fell by 0.74% to end April at $1,651.25 per ounce. Silver actually bounced back a bit to $31.20, gaining 0.19% on the final day of the month. The dollar firmed against the euro, gaining 0.08% to close at 0.7555 euros.

For the month, cash was the best place to have your wealth. The dollar gained 0.76% against the euro in April, while the only major stock index to post gains was the Dow, and the gains were miniscule (0.01%). The S&P 500 and Nasdaq both posted monthly losses, 0.75% and 1.46%, respectively. Gold fell 0.68%, and silver fared worse at -3.79%.

For the year, silver is still up more than 10%. But after posting huge gains the first couple of months, it has been coasting. Is this good or bad news for silver investors? Well, it depends on what phase of investment you’re in. If you’re still accumulating, then lower prices should be welcomed. After all, $1,000 can buy you more silver at $31 than it can at $48, and those ounces still have their same intrinsic value either way. Nevertheless, I wouldn’t count on silver dipping below $30 per ounce.

If it’s going to, though, it’s likely to happen in May.