Metals Weekly Round-Up: Silver Goes Viral, Reaches 7 Year High

Both gold and silver are on track to end the week at a loss, with silver shedding 13.9 percent from its Monday (February 1) high of US$30.03 per ounce.

The white metal was initially benefiting from the WallStreetBets story, as well as retail investor sentiment, although that support appeared to weaken after the first morning bell for the month.

By Tuesday (February 2), silver was back in the US$26 range.

The yellow metal also faced headwinds from a positively performing US dollar and rising Treasury yields. The pressure forced gold below US$1,800 per ounce for the first time since late November.

February has been volatile for gold, which has been pushed lower as the US greenback enters territory unseen since late November 2020. The precious metal’s price dipped as low as US$1,784 this week, weighed down by a dampening in safe haven demand.

“There is some technical rebound as investors think Thursday’s (February 4) drop was overdone, but overall trend in gold remains bearish on rising dollar and yields,” said Margaret Yang, a DailyFX strategist.

The recent price drop could be indicative of some long-term challenges in key markets. According to a recent report from the World Gold Council, gold demand in China fell 27 percent in 2020. A return in retail demand is likely, but there may be declines in other areas.

“While a relatively positive outlook for China’s economy in 2021 could extend the recovery in local gold consumption, challenges arise from the possible lower investment demand for gold and the lightweight trend in the gold jewellery sector,” reads the overview.

Gold was priced at US$1,808.73 as of 11:25 a.m. EST on Friday (February 5).

Silver started the month of February by registering a seven year high as news around a Reddit-induced short squeeze reached a fever pitch. The WallStreetBets forum has since moved away from silver to refocus on GameStop (NYSE:GME), though some of the interest lives on.

As Chris Marcus, founder of Arcadia Economics, told the Investing News Network, 115 million ounces were added to the iShares Silver Trust (ARCA:SLV) over a three day period.

Watch Marcus discuss silver market manipulation and where the metal may go next.

“I really want to be careful of how I’m phrasing things today, because I don’t want to scare people. Having traded equity options throughout 2007 and 2008, and (having studied) gold and silver ever since then, there have been a lot of times where it felt like things were building — but there are a lot of signs emerging that something is happening now,” he said.

At 11:26 a.m. EST on Friday, silver was trading for US$26.42.

Platinum rallied to a four year high of US$1,125 per ounce to start the month. The spike came just days after Anglo American Platinum (Amplats) (LSE:AAL,OTC Pink:AGPPF) announced a 49 percent output decrease for Q4 of last year.

COVID-19, paired with the closure of the company’s convertor plant, contributed to the decline. After hours on Thursday, the automotive metal fell to US$1,073. Platinum was selling for US$1,118 at 11:26 a.m. EST on Friday.

The Amplats production slip also benefited palladium, which trended higher for the majority of the five day period. By Friday, its price had climbed 3.7 percent from Monday’s US$2,189 per ounce level.

At 11:27 a.m. EST on Friday, palladium was valued at US$2,264.50.

The start of a new month proved challenging for base metals as broad declines weighed on the sector.

“The base metals are still for the most part in sideways-to-lower consolidation trading ranges, but what weakness has been seen in recent weeks has not picked up downward momentum, suggesting there is little appetite to reduce exposure on a large scale,” reads a Friday note from Fastmarkets.

Copper prices started the session at US$7,827 a tonne and subsequently fell lower. By Tuesday, the value of the red metal had slid below US$7,800.

The decline was brief, and prices climbed back above that threshold a day later. For the remainder of the quarter, Fastmarkets analysts remain positive about the red metal.

“In 2021, COVID-19 and demand from China will continue to have a far greater influence on copper prices than the green agenda,” the firm’s report reads. “We see a big supply deficit this year while demand and economic activity bounce back from the COVID-19 shock, fueled by policy support from governments and central banks.” Copper was moving for US$7,864 Friday.

Following a strong start in January, zinc prices have faced challenges over the last five weeks, shedding 10 percent. Falling to US$2,539 per tonne, prices moved north of US$2,550 on Wednesday (February 3). By Friday, zinc was priced at US$2,600.

Nickel also battled headwinds for the first week of February, losing 1.5 percent by Thursday.

With prices trending lower, nickel’s use as a key metal in the electric vehicle sector was highlighted in a Roskill report commissioned by the European Commission’s Joint Research Center. The joint effort forecasts a bright future for the metal.

“Automotive electrification is expected to represent the single-largest growth sector for nickel demand over the next twenty years,” the report reads. “The availability of suitable feedstock rather than processing capacity is the biggest ‘bottleneck’ in the nickel sulphate supply chain and is the cause of the market potentially going into a structural deficit post-2027.”

A late-week rally propelled the metal higher, and by Friday nickel was trading for US$17,915.

After falling from US$2,024 per tonne on Monday, lead fell to US$2,008 on Tuesday and spent the rest of the week moving sideways. Friday saw lead prices holding at US$2,010.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.