The economic slowdown in China is causing great trader concern which resulted in the prices of silver, copper, palladium and platinum all falling on Monday.
This was despite action by China's central bank to allay fears about the economic slowdown the country is currently experiencing.
Forecasts however indicate higher prices for certain metals by the end of 2015, including speculation that the silver price could increase by as much as 40% over current price levels.
The People's Bank of China announced a drop of a quarter of a percentage point in the benchmark lending and deposit rates, the third such drop in the past six months. The policy of monetary easing comes in the face of an economic slowdown that is more severe than previously anticipated.
MarketWatch columnist Craig Stephens said that the central bank had to steer a careful line between economic stimulation and money outflows as depositors could walk away from lower interest rates, looking for better opportunities elsewhere. The carrot to investors was an increase in the rate banks could offer on deposits from 1.3% to 1.5% above the benchmark rate.
Capital Economics remains bullish on the economic outlook for both China and the United States, bearing in mind the degree of interdependence of the two economies, which fuels the demand for commodities by the world's two biggest consumers.
The growth in the demand for the precious metals including silver is still growing in China, despite the slowdown.
The demand for Silver bars, a popular inform of investment in China, dropped by 50% in 2014 in the face of strong anti-corruption measures by the Chinese authorities, according to the annual World Silver Survey. Despite this drop in demand, Simona Gambarini, commodities economist at Capital Economics, still expects to see an upward improvement in the demand for silver for fabrication in the second half of 2015.
Capital Economics forecast a silver price of $23 per ounce by year end, with the price already having gained 4% during 2015. This price level would represent an increase of 40% from the ruling price on the Comex. July silver (SIN5, +0.76%) was at $16.31 per ounce, showing a small drop of 0.9% on Monday.
MT4 Chart: Silver