Silver Happy with Central Bankers, Flirts with $33

North American markets opened Tuesday to find that silver had climbed above the $32 mark and hit a fresh four-month high. The white metal gained $0.32 on Monday while the US and Canada were on holiday. The rise followed a rally on Friday during which silver’s New York spot price rose $1.34 to $31.74.

Friday’s price flight came in the wake of investors interpreting Federal Reserve Chairman Ben Bernanke’s speech at Jackson Hole as an indication that the door is open for further quantitative easing (QE). This conclusion was reached by clue hunters who try to dissect every utterance from the Fed. This time they scoured the chairman’s presentation, which drove the markets wild despite lacking any specific commitment to action. All day, market participants were virtually chanting, “QE! QE!” while prices climbed.

Volume was nearly double that of Thursday and much higher than the levels seen for much of the summer, which suggests that the doldrum days are indeed drawing to a close. North America was heading into a long weekend, so some of Friday’s action was also attributed to short covering.

With Bernanke having satisfied their desire for clarification on the Fed’s position, metal investors turned their sights to another highly-anticipated central bank event: the European Central Bank’s (ECB) monthly meeting.

Like Bernanke, ECB chief Mario Draghi did not disappoint on Thursday. The ECB president unveiled a bond-buying program under which the bank is prepared to make unlimited “sterilized” purchases of government bonds with maturities of one to three years. Sterilizing the purchases means that when the ECB spends money on bonds, it will drain an equivalent amount of money from somewhere else so as not to stoke inflation.

There are strings attached to this mechanism, but it still proved to be another “drive-the-markets-wild” central bank announcement in which silver participated.

The close

December silver on the COMEX recoiled from its high, but still managed to tack on $0.34, rising to $32.68 at the close of the US day session on Thursday. The New York spot market closed up $0.44 at $32.71.

Silver has flirted with $33, but positive reports related to employment, such as one produced by payroll service ADP, have raised concerns about the US Labor Department’s official report for August, which is set for release on Friday. Bernanke has indicated that employment is on the Fed’s radar, so this data is considered a major focal point for investors this week. Analysts are widely expecting gains in the range of 120,000 to 125,000 jobs, but QE fans are of course looking for disappointment.

More negative economic news was released about China this week, including the HSBC Flash China Purchasing Managers’ Index (PMI) data for August, which shows that the nation’s PMI fell to the lowest levels since 2009. Manufacturing activity declined to 47.6 from 49.3 in July; both numbers indicate economic contraction. However, many viewed this news as positive as it suggests that China is likely to sweeten the deal further by adding its own stimulus measures to the mix.

Company news

Great Panther Silver (TSX:GPR,AMEX:GPL) purchased the Mexico-based El Horcon silver-gold project from privately-owned Compania Minera El Dore for $1.6 million. El Horcon hosts nine known veins, covers 7,908 hectares and is within trucking distance of Great Panther’s Guanajuato mine complex.

Soltoro (TSXV:SOL) announced that three out of four step-out diamond drill holes at its Mexican El Rayo project intersected high-grade silver mineralization; each hole contains intervals of almost 500 grams per tonne of silver.

MAG Silver (TSX:MAG,AMEX:MVG) provided results from drilling at its Cinco de Mayo property in Chihuahua, Mexico. Hole 430, which holds 84 grams per tonne of silver with 1.6 percent lead and 11 percent zinc over 11.79 meters, has some of the best intercepts.

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