Silver Still Trading Sideways, but Lack of Volatility Promising for Prices

Last week, Silver Investing News quoted Gold Seek’s Chris Mullen, who accurately summed up silver’s recent price action with the comment that it “continues to attract selling at the $20 level and buying near the $19 level meaning its boring range bound trading pattern continues.” 

Unfortunately, that trend continued this week, with the white metal trading in a fairly small range of $19.12 to $19.68 per ounce.

While fans of silver no doubt hoped for a better performance, it was fairly clear even on Monday that this week would be a bit of a write off. Though the precious metal reached $19.67 that day, bouncing back from Friday’s weakness, Ole Hansen, head of research at Saxo Bank, told Reuters, “the move so far has not been convincing, so we’re still not sure whether it will stick.”

Indeed, it did not. Though silver managed to keep above $19.40 for all of Tuesday, supported by tension caused by the deaths of 30 pro-Russia separatists in a conflict with Ukrainian government forces, it took a fall on Wednesday, ultimately closing at $19.29. That decline continued fairly steadily today, with silver sinking as low as $19.12 on the back of reduced concern about Ukraine, as per Investing.com.

Silver ended today at $19.15.

Sideways movement not to last?

Fortunately, silver’s sideways movement is not likely to last much longer, at least according to Mike McGlone, head of US research at ETF Securities. He told Kitco News earlier this week that 30-day silver options volatility was sitting at about 12 percent at the end of the day on Tuesday, quite far off from its usual level of 30 percent or so. That’s significant, he said, because “[v]olatility is always mean-reverting, so when volatility is that low, [prices are] ready for a big move.”

Of course, that big move won’t necessarily be up. However, McGlone thinks “the path of least resistance is up,” largely due to the high gold/silver price ratio, strong retail investment demand and increased fabrication use. “Something has to give,” he concluded, “the question is where, when and how.”

Company news

Vancouver-based SilverCrest Mines (TSX:SVL,NYSEMKT:SVLC) said on Monday that it has started commissioning a 3,000-tonne-per-day CCD-MC processing plant at its Mexico-based Santa Elena mine. According to N. Eric Fier, the company’s president and COO, that’s a “significant milestone in the successful development of Santa Elena and the responsible growth created by the ‘phased approach’ business plan of the Company.”

Tahoe Resources (TSX:THO,NYSE:TAHO) capped off the week by providing its financial results for the first quarter of 2014. Its net earnings amounted to $24.8 million, or $0.18 per share, while its silver production came to 4.1 million ounces at an all-in sustaining cost of $10.25 per ounce produced, net of by-product credits.

Commenting positively on the results, Kevin McArthur, Tahoe’s CEO, said, “[w]e are extremely pleased with the Company’s first quarter of commercial production. The ramp-up to 3,500 tonnes per day (tpd) proceeded according to plan, and despite a handful of normal startup issues, the operations team maintained operating costs within expectations.”

Junior company news

On Monday, Tarsis Resources (TSXV:TCC) announced the completion of sawn channel sampling, mapping and rock and soil sampling at its Mexico-based Yago gold-silver project, commenting that assay results from sawn channel sampling include 3 meters grading 11.1 grams per tonne (g/t) gold and 31.6 g/t silver. That includes 1.35 meters grading 22.34 g/t gold and 36.5 g.t silver.

The next day, Dolly Varden Silver (TSXV:DV,OTCBB:DOLLF) released the results from the geophysical program completed at its British Columbia-based Dolly Varden property, commenting that they “further confirm drill targets for the Company’s proposed 2014 drill program.” They also have led to the identification of a number of new targets.

Also on Tuesday, Bayhorse Silver (TSXV:BHS) put out flotation assay results from two bulk samples from its Oregon-based Bayhorse mine silver property. They have allowed the company to essentially confirm “historic flotation recoveries in excess of 80% silver.” However, with optimization, Bayhorse thinks it will be able to achieve silver recovery of 90 percent.

Finally, Kootenay Silver (TSXV:KTN) said it is in the midst of planning a 3,000-meter drill program at the La Negra silver prospect in Sonora, Mexico. Drilling dates and the budget for the program will be announced in a future press release.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Frustration Rife After Yet Another Range-bound Week for Silver

The Gold/Silver Price Ratio is Out of Whack — What’s Next?