Precious Metals

Silver Investing

Steep losses have dragged silver into the bear camp.

After trading in a tight range for the last several weeks, silver has finally broken new ground. However, the metal moved to the downside and into bear territory, meaning that some market participants are now bracing for further price declines.

On Monday, silver still closed above $28, even if only two pennies above the mark. But the metal’s downward spiral did not stop there.

Tuesday, the market started out under pressure, which intensified as stocks rallied. Metals, including silver, continued to bleed as money flowed out of hard assets and into equities. Exaggerating matters was the greenback, which continues to show unexpected strength. Silver’s trading range was over $1, and having hit an eight-month low on Tuesday, the metal finished with losses of $0.76, at $27.26.

The selling trend continued on Wednesday, with silver losing nearly another 1 percent for the day. The metal was hammered below the $27 level for a closing New York spot price of $26.98.

As of Thursday, spot silver was down over 11 percent year-to-date, according to data from Reuters.

Disappointing data, oversupply bring silver down

Market participants are increasingly deeming silver’s underlying fundamentals weak. Safe-haven interest in the metal has largely dissipated and its industrial outlook is not particularly optimistic at this point.

Data released this week includes disappointing manufacturing figures from both China and the US. In India, silver prices hit a 15th low this week amid heavy speculative selling, reports of weak industrial demand and a lack of seasonal festivities to drive retail demand.

There is also a lot of silver on the market to be mopped up, as has been evidenced by multiple of announcements of supply increases and higher production expectations in 2013.

There is therefore limited optimism about the potential upside for the metal at this point, and bearish sentiment is prevalent.

US jobs report could move markets

North America woke up on Thursday to news that the Bank of Japan had announced an extremely aggressive monetary easing program. The plan will involve Japan nearly doubling its monetary base by the close of next year. Yet the silver market seemed to hardly care.

Some market participants have cited the possibility that Friday’s US jobs report could be a market mover. US jobless claims data released Thursday reveals that the US labor market lost some momentum last month as the number of people requesting unemployment benefits grew. The silver market also shrugged off this data for the most part.

INTL FCStone not optimistc

INTL FCStone said in a report that silver appears to be in the worst the technical shape of the precious metals. “We think we are going to be heading to the mid $26 mark in short order,” the firm asserted.

That is in line with the expectations of other market participants, some of whom have cited the risk of silver heading closer to the actual $26 mark. And the closer the metal gets to that point, the more that downside risk increases.

Scotiabank believes that support lies around the 2011 lows of $26.08. If that level is breached, silver will become susceptible to retracement to $24.15, the firm said.

The close

After hitting a nine-month low, May silver on the COMEX, clawed back some of its intraday losses and ended the US day session $0.07 in the green, at $26.87. By the close of the New York spot market, the pressure was back on, and the metal ended $0.08 in the red at $26.90.

Company news

NSX Silver (TSXV:NSY) announced assay results from the second-phase drilling program at its Dios Padre project in Sonora, Mexico. The company drilled 17 holes in and beneath the historic mining area. NSX notes in its press release that drilling encountered multiple thick zones of silver mineralization ranging up to 41 meters in thickness.

Significant drill intercepts include:

  • 26.6 meters in DP-21-2013 grading 107.4 grams per metric ton (MT) silver, which occurs from surface to 26.6 meters. This hole intersected the old workings at 26.6 meters and was terminated.
  • 18.9 meters in DP-21A-2013 grading 234.6 grams per MT silver and 0.179 grams per MT gold over 12.4 meters within that interval. In addition, gold mineralization was encountered over a 45.4-meter intercept with an average grade of 0.51 grams of gold per MT. The intercept envelopes a smaller, low-grade silver intercept of 19.5 meters grading 16.1 grams of silver and 0.406 grams of gold per MT.

Kootenay Silver (TSXV:KTN) commissioned SRK Consulting to provide an updated resource calculation for its Promontorio silver project in Sonora, Mexico.

The company said the decision to include gold assay results in the updated resource estimate follows extensive metallurgical testing and technical analysis that confirms up to 94.5-percent recovery of gold from pyrite concentrates can be achieved using a post-pressure oxidation treatment process.

Prospero Silver (TSXV:PSL) announced that its joint venture partner, Minera Hochschild Mexico, commenced a 3,000-meter reverse circulation drill program at the Baborigame project in Chihuahua. This initial program on the northern part of the 8,458-hectare claims is aimed at multiple targets defined during the past six months.

Wildcat Silver (TSX:WS) entered into a definitive agreement with Riva Gold (TSXV:RIV) that provides for Wildcat to acquire all the outstanding common shares of Riva in consideration of one common share of Wildcat for 4.7 common shares of Riva.

 

Securities Disclosure: I, Michelle Smith, do not own shares of any of the companies mentioned in this article.

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