Precious Metals

Though silver flirted with the $29 level, it couldn’t manage a close at or above it. Much market focus is on next week’s events.

*Correction: NSX Silver has released results from its drill program. 

Silver flirted with $29 on several occasions this week, but always pulled back to settle below the mark. On Tuesday, silver spot prices closed at $28.97. For silver to break into the upside in the near term, it is widely believed that at least one of two things needs to happen: there must either be significant economic developments or an announcement of considerable monetary easing, preferably from the US Federal Reserve.

On Monday, silver spent much of the US trading day above Friday’s close, but the metal couldn’t adapt to a risk on vibe, ending the day in NY with a five cent gain. Gains were seen again on Tuesday, but by midweek prices were on the way back down.

The Spanish bailout is an ideal example of the difference between positive economic developments and significant economic developments.

At the beginning of the week, investors were greeted with the news that EU leaders had agreed to a 100 billion euro bailout for Spanish banks. This news was considered positive, and markets rallied a bit, but even as they did there were underlying concerns that this news might actually be an indication of much larger problems ahead for Spain and other Eurozone members. The excitement quickly fizzled and focus returned to the region’s web of problems.

Getting a distinctly positive global macroeconomic outlook back in place probably requires a series of pro-growth economic readings from key global players, said a CME Group market note.

Volatility approaches

Investors should be prepared for the possibility that next week could be very volatile for the silver market.

While the Eurozone crisis seems to be centered on investors’ radar, much appears to be riding on the outcome of the rapidly-approaching Greek elections. Greek voters are set to go to the polls Sunday for a vote that will not only decide who leads the nation, but also whether Greece will exit the euro.

Commodity Futures Trading Commission data for the week ended June 8 shows an increase of 216.4 tonnes in silver’s net speculative length. This increase came after eight weeks of declines resulted in losses of 1,837.9 tonnes. The turnaround also came ahead of Fed Chairman Ben Bernanke’s testimony to Congress, which many expected would include positive indications, if not outright commitment, to further quantitative easing (QE). When that did not happen silver prices reflected the widespread disappointment.

On June 19 and 20 there will be a Federal Open Market Committee meeting, and market participants will be watching closely and listening carefully. There is quite a large camp betting that the Fed will give a thumbs up to more QE. As many believe this meeting is the last opportunity for the Fed to act before the US presidential election, disappointment could be severe if it fails to make a move.

The close

July silver on the COMEX closed near the session low on Thursday. At 1:30 EST the price was $28.47, down $0.47. New York spot silver closed down $0.22 at $28.64.

Company news

NSX Silver (TSXV:NSYannounced that results have been received for twelve of the 16 holes at its the recently-completed Phase 1 drilling program at its Dios Padre silver project in Mexico. The most significant result was a 50 meter intercept that assayed 74.2 grams per tonne of silver and 0.685 grams per tonne gold.


Securities Disclosure: I, Michelle Smith, do not hold equity interests in any companies mentioned in this article.


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