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After hitting a six-week high last Friday, silver took a blow on Wednesday. The metal spent little time below $34 before fighting its way to a fresh seven-week high.
Silver put on a bullish closing act last week. Silver futures hit a six-week high on Friday and the spot market gained $0.75 to close at $34.10. But this performance was later outdone when silver was knocked down, but managed to claw its way back to post a seven-week high.
The path for Friday’s action was partially paved ahead of North America’s opening as prices were up during overseas trade. Silver also benefited from supportive headlines, including a better-than-expected Chinese PMI and speculation that a Greek debt deal would be reached. Further, during US trading, there seemed to be much optimism that the fiscal cliff would be resolved. Silver clearly benefited from improved macroeconomic sentiment, though some of Friday’s action was also attributed to short covering.
Market participants apparently brought a newer and less profound level of enthusiasm to their trading posts on Monday, and silver spent most of the day in a tight range. Though it shook off pressure and managed to hold its ground, the metal only gained five cents for the day.
Silver had little opportunity to benefit from the boost that the euro got from news that European finance ministers had reached a deal regarding Greece. With the dollar strengthening on Tuesday, the white metal was unable to prevent its price from being dragged down. A $0.13 loss that left silver at $34.05 was perhaps an omen for what would happen next.
Silver continued showing signs of weakness overnight and was found trading below the $34 level. Then, right out of the gate on Wednesday morning, silver was swept up in a gold sell off. A minute into COMEX trade, a large sell order placed for the yellow metal dragged down its price while blown sell stops perpetuated further declines. As there were no apparent headlines driving the selling, there was a wide range of speculation behind the gold action; some saw it as a fat finger error while others saw it as market manipulation.
What is clear is that the action proved to be a blow for silver. Over 163,000 silver contracts were reportedly traded, the highest number since May 2011. The metal dropped as low as $32.90 on Wednesday. Silver put forth a commendable effort to pull off a partial recovery, but still closed with losses of $0.28 to settle at $33.77.
Silver’s recovery efforts continued Thursday, with the supportive positioning of a weaker greenback and higher crude. Data showing that the US GDP grew at a 2.7 percent annual rate during the third quarter, above expectations, was released. Spain and Italy both saw low yields during their bond auctions. And the ebb and flow of fiscal cliff concerns moved largely in the direction of optimism.
The close
COMEX floor trading closed Thursday with silver posting a fresh seven-week high, ending the session with a gain of $0.64 to settle at $34.41. The New York spot market closed up $0.50 at $34.27.
Company news
Endeavour Silver (NYSE:EXK,TSX:EDR) purchased the San Fernando property, which is 1.5 kilometers from its Guanacevi mine in Durango State, Mexico. The property is adjacent to the company’s emerging high-grade silver-gold discovery on the Milache property, where exploration drilling is ongoing. Exploration drilling at San Fernando is planned for 2013.
On Tuesday Kootenay Silver (TSXV:KTN) announced that drilling has begun at its Promontorio silver project in Sonora, Mexico. Two rigs are currently operating and a third is in transit to the site.
“Due to the accelerated nature of the program, shareholders can expect a steady stream of upcoming drill results coming from the Promontorio camp, as the resource expansion program ramps up over the coming weeks and months,” said CEO James McDonald.
Maya Gold & Silver (TSXV:MYA) published a 3D model of its Zgounder silver deposit in Morocco. Earlier in the week, the company reported closing the second tranche of a non-brokered private placement, bringing gross proceeds to C$7.7 million.
Securities Disclosure: I, Michelle Smith, do not hold equity interest in any of the companies mentioned in this article.
