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Silver spent much of the week under pressure primarily from EU concerns, but managed gains on Thursday.
Europe’s troubles continue to weigh on the markets, with Greece and its potential exit from the euro dominating concerns. The rallying dollar and Germany’s auction of interest-free two-year bonds are indicators of the risk aversion and desperation for safety that was seen in the markets this week.
Commodity Futures Trading Commission data through May 21 reported a sixth consecutive week of declines in net speculative length, which dropped 290 tonnes during the period. Though Standard Bank said the continued increase in shorts and decrease in longs does not bode well, it also reported some positive investment news: 49 tonnes of silver were purchased by ETFs.
Following last Wednesday’s decline to its lowest levels since December 29, silver managed to post a bullish close ahead of the weekend, with support attributed to short covering and bargain buying. The metal also seemed to shift away from its industrial peers, instead nestling closer to gold. The yellow metal was getting some safe haven support on Friday, and silver may have received some spillover attention. Bulls headed into the weekend needed to break through the $29 technical resistance level.
By Monday, the momentum had faded. Silver spent the first three days of the week outdoing its New York spot closing price to the downside. Weak prices in India were not only associated with global negative market sentiment, but also with lack of demand for the white metal. On Wednesday, silver lost the ability to hold its head above $28 and sank to $27.78.
Despite the metal’s weak performance, silver miners did well, with juniors reportedly enjoying some of the strongest gains. For some time now, many market commentators have been insisting that miners are undervalued and are good buys, especially on the dips. That message appears to be resonating with some investors.
“As I’ve mentioned just about every day recently, some very big [with a capital ‘B’] buyers have been buying gold and silver stocks with both hands ever since the low last week,” Ed Steer, director of the Gold Anti-Trust Action Committee and Casey Research correspondent, wrote in his daily market note.
Many market participants spent the earlier days of the week waiting to see what would come out of Wednesday’s EU Summit, which may have contributed to the price weakness. Doing so was a waste of time as the meeting offered little insight on how the crisis in Greece and the larger Eurozone will be handled.
Though the European strategy is still unclear and the dollar hit a fresh 21-month high, silver found its way into the green Thursday, managing its first positive close for the week. Both industrial and speculative appetites for silver also re-emerged in India that day.
Even with silver’s move up, the overall objective has not been achieved. Another weekend is approaching with bulls possessing the same upside breakout objective: pushing silver above $29.
The close
July silver on the COMEX closed up at $28.04. New York spot silver closed at $28.32. This is a gain of $0.48, but is still below Monday’s close of $28.47.
Company news
Coeur d’Alene Mines (NYSE:CDE,TSX:CDM) resumed full production at the Palmarejo mine on Thursday following a shutdown caused by a group of workers employed by a subsidiary of Coeur Mexicana blocking access to the mine. The individuals agreed to return to work and the company has said that material impact on 2012 production is not expected.
Hecla Mining Co (NYSE:HL) announced plans to reopen its Lucky Friday Mine. The company plans to start rehiring in July and expects to have a full workforce by year-end.
Securities Disclosure: I, Michelle Smith, do not hold equity interests in any companies mentioned in this article.