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Though the silver market appears to be looking for something to provide it with direction, it was on the rise this week. Data from China could determine whether it continues along that path.
By Michelle Smith — Exclusive to Silver Investing News
Silver’s multi-week downtrend provided the bears with a technical advantage at the beginning of the week, but by Thursday, the bulls looked to be regaining some control. The silver market appears in need of direction and therefore remains vulnerable to macroeconomic news. China, set to release key data Thursday night, could very well determine the path that the metal travels.
As expected, last Friday’s US monthly jobs report created buzz as it was generally considered to be a disappointment. The 120,000 jobs added fell short of analysts’ predictions and marked the lowest rate in five months. Immediately following the release, there was talk of how significant this figure would likely be to the Federal Reserve, and with that came speculation as to whether quantitative easing would be put back on the table.
Silver, which opened the week displaying weakness, strove for gains during the first day of trading. At times on Monday the metal traded at the highest levels seen since April 4. Most of the upward movement was believed to be a spillover from gold, which opened the week strongly in part due to gold protests in India ending, but some of the positive activity was attributed to renewed hope for stimulus. Silver, however, could not keep a grip on its initial gains, and the week’s first New York closing spot price was $31.76.
Throughout the week silver appeared to trade along with other industrial metals such as copper and platinum. When they showed weakness, silver often declined in suit, but when they climbed the white metal followed. On Tuesday, for example, the Dow and S&P 500 had a terrible day, but silver decoupled from equities and managed to close up at $31.84.
Chinese data
The market took notice of Chinese trade data, which showed that the nation’s trade deficit increased by unexpected proportions. China, known for its surpluses, reported a $31.5 billion deficit for February. Given that imports were up, one may assume that this is positive news. However, according to Bloomberg Businessweek, this is China’s largest deficit since 1989.
For some, the trade data stoked concerns about the country’s economic conditions. But, some analysts say the markets should not read too much into this data, especially since China celebrated the lunar new year in January and that is the nation’s largest festive event.
Though a number of markets received support from rumors that China may lower its reserve rate requirements, the silver market seemed unfazed.
China’s GDP is set to be released Thursday night, and the market is not expected to ignore it. Silver, which had a good day on Thursday, is believed to have gained some support from positive expectations ahead of this release. Given the trade deficit earlier in the week, if the Chinese GDP disappoints, coming in below 8.5 percent, silver is at risk of a setback.
The close
New York’s spot market closed Thursday up $0.80 at $32.41, the highest close of the week. Through midday Canadian trading, silver miners were also doing well, with the majority enjoying gains.
Company news
Endeavour Silver (TSX:EDR,NYSE:EXK,FWB:EJD) reported record production in Q1 2012 from its mines in Mexico. Compared to the first quarter of 2011, silver production rose 19 percent to 1,072,491 ounces and gold production rose 26 percent to 6,231 ounces.
The company also announced that most of the metal accumulated in Q4 2011 was sold when prices strengthened in January and February. But, as prices weakened in March, it decided to accumulate Q1 2012 production and will sell some or all of that metal at appropriately higher prices if the need for cash arises.
Junior mining news
Caracara Silver (TSXV:CSV) announced that it has received the environmental permits needed to start drilling at its Marcia property in Peru.
The company has signed a 3,000 meter drilling contract with Bradley-MDH. It expects the drilling program to begin on April 23 and be completed in approximately three months.
Cream Minerals (TSXV:CMA,OTCBB:CRMXF,FWB:DFL) provided an update on the release of the resource estimate for its Nuevo Milenio project. Citing the volume of data and the challenges of providing the data to its consultant in a timely manner, the company now anticipates the release to be complete by the end of May.
Securities Disclosure: I, Michelle Smith, do not hold equity interest in any of the companies mentioned in this article.