Silver Starts February Lacking Direction

Precious Metals

With nothing to provide direction for a move, silver remains range-bound.

Silver still seems to be looking for a development that will provide the market with direction. While waiting for that to come, the metal has stayed within a tight range that has not allowed it to close above $32 in the past week.

Silver diverged noticeably from gold this week. On occasion, silver was up while its yellow peer was down, but silver also spent a lot of time underperforming.

There was some speculation that silver was disconnecting from gold because it was beginning to veer toward its industrial track. That has not been confirmed and in fact may not be true as if that was the case, the metal would be likely to trade in tune with the likes of copper. However, there were occasions — such as Wednesday night — when copper was making positive moves and silver was not.

Robin Bhar of Societe Generale said the recent gold and silver price action, along with underlying investor activity, suggests that bullish undercurrents are starting to support the metals, with silver leading.

However, Bhar warned that a rise for silver is likely to be short-lived. A surplus equivalent to more than seven weeks of global industrial demand is expected this year, and the firm does not expect investors to consume all of that metal.

Some bulls are likely finding encouragement in the rising open interest (OI) in COMEX silver and the fact that net speculative length as a percentage of OI has been increasing. It is now back over 20 percent, which is above the five-year average.

The latest Commitment of Traders report shows a healthy 477-metric-ton (MT) addition to net speculative length for the week ended February 1, bringing the total additions for the previous two weeks to more than 930 MT.

In the ETF arena, liquidations were notable, with nearly 128 MT of silver shed from holdings this week.

Perhaps discount broker Charles Schwab (NYSE:SCHW) will change that. On Thursday, the company launched ETF One Source, a platform that allows commission-free trading of a broad range of ETFs. Schwab selected ETF Securities to provide precious metal funds, and its offerings include Physical Silver Shares (ARCA:SIVR). Investors can also get exposure to silver by way of Physical Precious Metals Basket Shares (ARCA:GLTR) and Physical White Metals Basket Shares (ARCA:WITE).

Following an $0.08 loss on Monday, silver managed to cross the finish line with a gain of six pennies on Tuesday. Wednesday’s gains were half of that, placing silver’s closing New York spot price at $31.85.

The close

Those meager gains were stripped away Thursday. The US floor session ended with COMEX March silver losing $0.42 to close near low of the session at $31.45. The New York spot market closed with silver posting losses of $0.39, down to $31.46.

On Friday China will release economic data, a move that may prompt some moves in the market. Next week, China will be celebrating the lunar New Year.

Company news

Great Panther Silver (TSX:GPR,AMEX:GPL) intercepted high-grade silver and gold and also discovered two new zones of silver-gold mineralization at its Guanajuato mine complex.

Drilling at Valenciana produced an intercept of 2,900 g/t silver and 26 g/t gold over 1.3 meters, while the two new discoveries at Guanajuatito are highlighted by intersections of 1,010 g/t silver and 6.67 g/t gold over 1.1 meters and 1,460 g/t silver and 4.79 g/t gold over 1.15 meters

“These are significant results in that they demonstrate our ability to make new discoveries at Guanajuato while continuing to expand the size and extent of the known mineralized zones,” stated Robert Archer, CEO of Great Panther. “Furthermore, the Valenciana drilling indicates that there is still un-mined high grade silver-gold mineralization in this historic mine that is worthy of follow up.”

Canadian Royal Mining (CRMC) filed a lawsuit against Huldra Silver (TSXV:HDA) for $461,099 for failure to pay invoices associated with contracted mining services. The damages sough by CRMC also include costs such as loss of profit, interest and court expenses.

In response, Huldra announced that it intends to file a countersuit against CRMC for damages associated with the contractor’s failure to provide equipment and services for Huldra’s mill in Merritt, British Columbia.

Huldra says it has taken the necessary steps to get the mill into operation.

Silver Bull Resources (TSX:SVB,AMEX:SVBL) said its previously announced offering of up to 22,750,000 units at $0.40 per unit is fully allocated, noting that it expects to receive gross proceeds of $9.1 million prior to deducting agency commissions and offering expenses. The offering is expected to close on or about February 14.

Silver Bull intends to use the net proceeds from the offering for the preparation of a NI 43-101 resource update report, metallurgical studies, drilling, commencement of a preliminary economic assessment and general working capital requirements with respect to advancement of its Sierra Mojada silver project in Mexico.

The Moroccan government signed an agreement allowing Maya Gold & Silver (TSXV:MYA) to acquire the Touchkal property, which is 5 kilometers from the company’s Zgounder silver mine.

“This acquisition strengthened Maya’s land position around its Zgounder silver mine and is seen as an opportunity to discover new silver and other metals mineralization in this largely unexplored segment of the metal-rich Siroua ‘window,’” said Noureddine Mokaddem, president of Maya.


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

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