As the dollar continues its rebound, the curbed demand for alternative investing has taken a heavy toll on precious metals. As the dollar made its strongest gain last week since October 2011, both gold and silver noticeably fell. In 2013 alone, gold has already tumbled 24%, eliminating $60.4 billion of this asset’s value. Fortunately, silver has held steadier, only falling 0.8% to $19.792 per ounce. However, of all 24 commodities represented in Standard & Poor’s GSCI Spot Index, this tumble put silver at the bottom of the list.
The gut-wrenching drop for precious metals has taken a toll on Pan American Silver. According to the company’s Q1 2013 report, the organization experienced a loss of $17.29 per ounce of silver. Rob Doyle, chief financial officer of Pan American Silver, recently stated that the drop in precious metal prices “has definitely been challenging the industry, and in our case we have a portfolio of mines, and some are lower cost and some are higher cost…the current price is challenging those higher-cost operations.”
Fortunately, despite the recent value challenges, a silver lining has certainly appeared for the industry, as a visible floor has come into play.
Expensive Operations to Be Shut Down – For Now
Companies such as Pan American Silver in the precious metals industry could shut down or temporarily halt production in their most expensive mines to combat lower values. However, if lower silver prices persist, those operations could be shut down for good. The silver lining extends in that a reduced supply would in turn provide a visible floor for the price of silver.
According to Doyle, technical factors and large players certainly didn’t help the situation with precious metals. He explained that as the market moved lower, it created a vicious cycle that fed on itself and continuously pushed prices lower as selling increased. Because a floor is visible, though, Doyle is confident that precious metals, particularly silver, will become stronger in the long-term. While silver may rebound as the fundamental economic picture becomes more apparent, prices may continue to drop – and if that’s the case, companies like Pan American Silver will have to reevaluate their global and national operations. Whether or not companies shut down their operations, there’s certainly a silver lining in sight!