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Silver is trying to rise above $35, but is being repeatedly smacked down as it tracks gold.
Looking at silver from a quarterly perspective could distort one’s view of the market’s current condition. Silver finished the third quarter with gains of about 25 percent, but now the metal is struggling to produce further meaningful gains.
For bulls, recent central bank action was supposed to be a celebratory occasion. However, after the highly-anticipated rollout of QE3, the metal has not been able to sustain a close at or above the $35 level. This week, it would be an understatement to say that silver was within a tight range; through Wednesday, New York closing spot prices differed by pennies. But looking at the metal’s intraday moves reveals a market that clearly — though unsuccessfully — aimed for much higher levels.
On Monday, silver had an intraday range of about $1.40, though it soared to about $35.50. The closing New York spot price was $34.65.
The silver market appears to be gunning for higher prices and has once again turned to the gold market for support. But its tendency to hook its caboose to the more popular yellow metal seems to be part of silver’s problem. This week, the association has not been a beneficial one for the white metal. Gold, much like silver, is trying to make gains, but has been repeatedly smacked down by resistance — and that negative action has been attributed to the struggle in the silver market.
For instance, on Tuesday, when the COMEX December silver contract came under pressure, CME Group said, “silver could have drafted some indirect support from positive action in copper but instead the weak action in gold was dominating the silver trade.”
Silver fared better on Wednesday, mimicking the gold market with positive intraday action in the gold market, But again, the metals came under pressure and momentum fizzled.
Silver market observers are starting to suggest that the metal ran up too far and too fast for too slight of a reason. Looking at last week’s Commodity Futures Trading Commission data, Standard Bank said there was a “disconcerting increase in speculative shorts.” As net speculative length reached a 12-month record during the previous reporting period and totaled 21.6 percent of open interest, Standard Bank described it as “indicative of a market that is overstretched.”
Silver ETFs last week revealed that holdings held up. But Standard Bank pointed to a downturn in additions. 108 tonnes were added compared to 231 and 159 tonnes in previous weeks.
Though silver is holding its ground above $34 and is showing the ability to lure some intraday support to move higher, its inability to close over $35 seems to represent the market posing the question: “now what?”
The close
Thursday, the combination of risk-on market conditions and strength in gold, which found some fresh safe haven support, helped December silver on the COMEX close up $0.27 to $34.96, a seven-month high. The New York spot price close up $0.33 to $34.97.
Company news
MAG Silver (AMEX:MVG,TSX:MAG) announced that the initial independent mineral resource estimate for the Bridge Zone/Jose Manto on its Cinco de Mayo property in Mexico has been completed.
After completing eight drill holes at it Marshall Lake property in Ontario, White Tiger Mining (TSXV:WTC) said drilling has been paused as the remaining drill core is sampled and prepared for shipping to ALS Minerals.
The company said in each hole mineralization occurrence has been visually observed. Initial assays are expected in two to three weeks.
International Northair Mines (TSXV:INM) announced the acquisition of a package of mineral concessions totaling nearly 32,000 hectares contiguous to the company’s La Cigarra project in Mexico.
Northair said drilling at La Cigarra has outlined a potentially surface-mineable mineralized system with an open-ended strike length in excess of 3 kilometers.
Securities Disclosure: I, Michelle Smith, do not hold equity interest in any companies mentioned in this article.
