It’s safe to look. Silver will not go into the weekend without posting a close above $34, a risk the market appeared to be facing during the first half of the week. On Thursday, silver shook off the pressure it was under and recovered its losses.
Silver found itself under pressure coming out of the gate this week. The metal closed $0.55 lower on the first trading day at $33.97, marking the first in a series of sub-$34 finishing prices.
With the fanfare surrounding QE3 rapidly dying down, the silver market has increasingly returned to trends seen earlier in the year, such as trading with industrial metals, struggling on risk-off days and showing signs of weakness when the greenback strengthens.
Pessimism surrounding the effectiveness of QE3 was one of the factors blamed for some of the pressure on the white metal mid-week. Growing doubts were aggravated when Charles Plosser, president of the Philadelphia Fed, slammed the measures, saying they are not “likely to be effective in the current environment” and “[w]e are unlikely to see much benefit to growth or to employment from further asset purchases.”
Standard Bank said that the comments raised concerns that the Fed will rethink its open-ended commitment.
But on Thursday the silver market had a new attitude, having found strength overnight. Some credit for the boost was given to news of a 365 billion yuan (about $58 billion) injection into money markets by the People’s Bank of China. That was reportedly the largest weekly injection in history.
Strength in the market is also believed to be technical.
“You’re probably seeing a little fear buying here, but more so it’s technical. You came down and tested the 20-day average in both gold and silver ($33.45),” said Charles Nedoss, senior market strategist for Kingsview Financial. He said that when the market was held up we got a technical bounce.
India saw a reverse in the silver market’s three-day losing streak on Tuesday largely in response to physical demand. Lower silver prices encouraged buying to fulfill wedding season demand.
Silver prices were also up on the Shanghai White Platinum & Silver Exchange Tuesday. That followed a market note from Standard Bank that says Chinese customs data reveals that silver imports grew to 304 tonnes in August compared to 272 tonnes imported in July.
“While this might be a signal that the upward trend in silver inventories in China is ending, we still believe that domestic stockpiles are extremely large when compared to lackluster fabrication demand,” the bank said.
While on the subject of physical demand, silver players may want to plot the release of September purchasing managers’ index data on their radar. News surrounding the figures could produce some volatility.
December silver on the COMEX finished Thursday’s US floor trading near session highs, up $0.79 at $34.73. The final New York spot price was $34.39, a gain of $0.40, but also evidence of the pressure in the market.
At last glance, silver mining stocks were mostly in the green.
NSGold (TSXV:NSX) announced that it signed a letter of intent to acquire the Silver Hill property in Nevada from Cerro Rico Ventures. Strong silver and associated metals based on sampling by independent geologists and prior owners are listed among management’s reasons for considering the property to be highly prospective.
“We continue to see very positive results as expected from our twinning program in the high grade silver zone. Holes that intercept the east-west trending structures that control the high grade silver mineralization are typically grading well over 100g/t silver. Holes that intercept the lower grade halo that surrounds the high grade packages are often grading between 50-80g/t silver and show great continuity, which will provide the tonnage for a potential bulk mineable deposit,” said Tim Barry, president, CEO and director.
Securities Disclosure: I, Michelle Smith, hold no direct investment interest in any company mentioned in this article.