Precious Metals

Silver couldn’t seem to decide whether to move up or down this week, so it did both.

This week, silver was unable to sustain last week’s gains, sinking below $20 and only passing that mark on two brief occasions.

Silver started out below $19.80 per ounce on Monday, but quickly rose to $20.12. However, concerns prior to a two-day Federal Reserve meeting set to begin the next day soon drove it back down and the metal closed the day at $19.92.

Tuesday, silver continued to fall, dropping as far as $19.57 early in the morning. Though it was able to rise to $19.97 later in the day, by Wednesday it had fallen even lower, to $19.49, on the release of US second-quarter GDP and June private payroll numbers, according to Scotiabank’s Gold & Silver Marketwatch. Later that day, the white metal made its second rise above $20, hitting $20.04 as market participants took in the news that the Fed will continue quantitative easing.

Silver closed Thursday at $19.63 after hitting a high of $19.90 earlier in the day.

If Barclays is to be believed, investors may still have more up-and-down movement to weather. The investment bank said Monday that the white metal may decline another 12 percent to hit its lowest price in three years. It believes silver may be set to form a “a triangular pattern called a bearish pennant,” according to Bloomberg.

Dhiren Sarin, the firm’s chief technical strategist for Asia Pacific, noted, “[w]e are moderately bearish at the moment though we are watching these levels.”

Gold-silver ratio to rise

The gold-silver ratio — the amount of silver ounces needed to buy an ounce of gold — rose to a three-year high of 66.6 on July 19 and is set to reach 70 by the end of the year as a result of excess silver supply, Bloomberg reported.

Explaining the situation, Dominic Schnider, head of commodities research at UBS’ Singapore-based wealth management unit, told the publication, “[t]he silver market is in fabrication surplus, and the only thing that’s keeping it alive is investment demand and there is no meaningful increase in ETFs. In an environment where gold falls, silver simply just does more, it’s more volatile.”

Company news

Primero Mining (TSX:P,NYSE:PPP,ASX:PPM) on Monday provided an update regarding the Mexico-based Cerro del Gallo gold-silver-copper development project, of which it owns 69.2 percent, noting that it will lower its estimated 2013 capital spending for the project to around $15 million. Further, this year it aims to “complete all outstanding permitting, land acquisition, basic engineering of the mine and the processing facilities, and a preliminary exploration program, including condemnation drilling.”

Yesterday, Hudbay Minerals (TSX:HBM,NYSE:HBM) released its results for the second quarter of 2013, stating that its revenue for the period came in at $130.7 million, down $59.2 million from the year-ago quarter. The decline was caused by lower sales volume, due mainly to the permanent closure of the company’s Trout Lake and Chisel North mines as well as lower metals prices. Hudbay’s full-year guidance for production and operating costs remain the same.

Junior company news

Also yesterday, Kootenay Silver (TSXV:KTN) provided an update on the ongoing hydrologic and environmental baseline studies that are required for the advancement of its Mexico-based Promontorio silver project. Three monitoring wells have been put in place “along the main corridor of mineralization stretching from the Northeast Zone through the Pit on to the SW zone” and environmental baseline work is now complete, the company’s press release states.

This morning, West Kirkland Mining (TSXV:WKM) put out a new mineral resource and preliminary economic assessment (PEA) for its TUG project, located in Utah. The PEA predicts a 26-percent after-tax internal rate of return and net present value of US$9 million at a gold price of $1,525 per ounce and a silver price of $28 per ounce. It also estimates an in-pit indicated resource of 114,000 ounces of gold and 5.4 million ounces of silver with an inferred resource of 3,000 ounces of gold and 298,000 ounces of silver.

Paramount Gold and Silver (TSX:PZG,NYSEMKT:PZG) intercepted gold and silver mineralization “west of the Pad zone and below the old Sleeper Pit” at its Sleeper gold project, located in Nevada. Drill hole PCG-13-034 is “most likely to add to resources,” according to Paramount; located directly under the bottom of the Sleeper Pit, its most significant intercept is 32 meters averaging 1.47 g/t gold and 1.9 g/t silver.

Further south, in Mexico, El Tigre Silver (TSXV:ELS,OTCQX:EGRTF) announced that the Secretary of Environment and Natural Resources has approved an environmental plan that will allow it to develop and construct its El Tigre tailings recovery project. That means the company can now go forward with the plans it outlined in its July 4, 2013 preliminary feasibility study.


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

Related reading: 

Silver Climbs, Edging Over $20

Silver Tailings: Profitable Waste?


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