Precious Metals

Bond Auctions and Weak Dollar Help Silver Break $30/Ounce

Precious Metals

Silver prices broke the $30 mark for the first time in nearly a month. Fueled by a weaker dollar and successful bond auctions in Italy and Spain, the price of silver may be heading higher still.

By Michael Montgomery—Exclusive to Silver Investing News

Silver prices made gains on the back of better-than-expected European bond auctions as well as weakening US economic data. The decline of the US dollar index also played a supporting role for precious metals. Silver ended the day up $0.28 to $30.25 per ounce, surpassing the $30 mark for the first time since mid-December.

Successful European bond auctions helped to alleviate some of the worries in the Eurozone. As a result of the auctions and weak US economic data the euro made gains on the day.

Spain easily doubled its predicted target from its bond auction. The treasury raised 10 billion euros, the predicted target of 5 billion euros from the sale of three bonds maturing in April and October of 2016 as well as a new three year bond.

Italian bond yields came down sharply in the latest round of auctions. The country paid less than half for its one-year bills as it did in last month’s auction. “The yield on Italian 12-month bills fell to 2.735 percent, from the near 6 percent yield Italy paid to sell one-year paper at a mid-December auction,” reported Tomas Gonzalez, for Reuters.

However the two countries still have a long road to recovery. The overall European economic picture is weak, and teetering on the brink of recession. While this one successful auction may have helped precious metals on the day, the amount of capital that needs to be raised by the faltering economies, as well as the banks is high.

Dollar weakens

The US dollar index lost 0.49 to 80.80 by mid-afternoon after a disappointing job report showed that jobless claims climbed 24,000 for the first week of the New Year. The weak job data is a departure from December’s employment reports which indicated an increase, however, the fluctuation is being attributed to seasonal factors around the holiday season.

“There is usually a surge in seasonal layoffs at this time, and that is what’s happening here,” stated Jonathan Basile, senior economist at Credit Suisse. He added, “Claims have shown an improving trend. It’s a vote of confidence for continued improvement in the labor market.”

The trend for the US is still positive. While the greenback did lose on the day, there is still an uptrend in the US dollar index.

Technical for silver prices  

Silver is in a steady and promising two week uptrend, from the December low of $26.16 per ounce.

“Bulls’ next upside price breakout objective is closing prices above solid technical resistance at $31.00 an ounce. The next downside price breakout objective for the bears is closing prices below major technical support at $28.12,” stated Jim Wyckoff, for Kitco.

Going forward, the situation in Europe may soon be back on the front burner as long term solutions have yet to be put in place. The dollar will be the benefactor from any negative news coming from Europe. This will put downward pressure on silver and gold prices.

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