Weaker Silver Prices and Forecast Changes

Weaker Silver Prices and Forecast Changes

When silver snapped its three-day losing streak Tuesday with $0.17 in gains, the price was $31.12. Wednesday’s losses of $0.34 dragged the metal back to $30.78, highlighting a challenge silver has faced this week: keeping its head above $31.

Some weakness in the silver market was to be expected given the week long Lunar New Year holiday in China and the closure of other Asian markets. Other market participants are also believed to be playing the sidelines ahead of this weekend’s G20 meeting where the potential for a currency war is expected to be a prominent topic.

Also weighing on silver is the current market sentiment. As noted last week, questions emerged about the meaning of diverging silver and gold prices. Some thought it may be an indication that silver was now taking the route of physical commodities.

Monday CME Group said silver’s sloppy performance last week in the face of persistent gains in US equities seems to suggest that this is not the case.

“Silver and gold both appear to remain in a partial safe haven liquidation bias and it could take renewed eurozone turmoil, soft scheduled data, or steep declines in equities to provide the market with fresh buying interest,” CME Group said.

This fell in line with the comments from a number of other market participants.

Deeming silver likely to follow gold and forecasting price weakness for both, INTL FCStone commodities consultant Edward Meir, said “the main drag on gold prices at this particular juncture is the fact that we are seeing money move into industrial metals, corporate bonds, sovereign paper and equities, leaving much less of the investment pie available for gold and silver.”

Likewise, UBS lowered its one month gold forecast and since the firm expects silver to be the yellow metal’s follower the one month silver forecast was also lowered to $33.

In the ETF market investors have apparently changed course as last week over 48 metric tons were added to holdings after two weeks of heavy liquidation. For silver investors with a strategy of buying the dips, this could be a green light period as some market participants view silver’s price weakness as short term.

This week, HSBC boosted its 2013 silver forecast to $33 and its 2014 silver forecast to $31. The change was attributed to four factors: stronger industrial demand, steady investment appetite, strong coin and bar purchases and a bottoming out of jewelry demand.

UBS also signaled improvement ahead stating the firm was keeping its three month target for silver at $37.

The close

March silver on the COMEX fell to lowest level in a month during the US session Thursday. It ended with losses of $0.51 at $30.35. Silver on the New York spot market saw losses of $0.38 finishing at $30.40

Company news

Coeur d’ Alene (TSX:CDM,NYSE:CDE) made a bid for Orko Silver (TSXV:OK,OTC Pink:OKOFF) that implies a price of C$2.70 per Orko share based on February 12 closing prices. This offer has been deemed a “superior proposal” to an existing arrangement with First Majestic Silver (TSX:FR,NYSE:AG), which was announced in December.

Based on February 12 share prices, Orko believes the Coeur proposal represents a premium of about 25 percent to the implied value of the consideration of the First Majestic agreement. If First Majestic does not amend its offer or if the Coeur offer remains superior, Orko said it will pay First Majestic a termination fee of C$11.6 million and enter into the agreement with Coeur.

Thursday First Majestic cited its five-day allowance to amend its offer and said the company is considering its position.

McEwen Mining (TSX:MUX,NYSE:MUX) said operations at the San Jose Mine in Argentina have resumed after a disruption was caused by employees suffering from gastroenteritis. The employees have fully recovered, the company reported.

A severe storm has interrupted drilling at South American Silver’s (TSX:SAC,OTCQX:SOHAF) Escalones site in Chile due to lack of access.

The company said that there was no loss or damage to its people, equipment or facilities, but there was significant damage to the access road leading to the site. The initial assessments suggest accessing Escalones by light vehicle may not be possible for six to 10 days and access by heavy vehicle may not be possible for up to a month. South American Silver said it will help to get the road back into service.

Teuton Resources (TSXV:TUO,OTCBB:TEUTF) announced that its optionee, Rotation Minerals, completed drilling 25 holes on the 4-J’s property in British Columbia.

Highlights from the first eight holes include: 2.44 meters of 1.29 g/t gold, 140.5 g/t silver, 3.23 percent lead, 11.73 percent zinc and 2.61 percent antimony in DDH4J-2012-1 and 3.05 meters of 0.7 g/t gold, 156.5 g/t silver, 2.5 percent lead, 9.43 percent zinc and 1.10 percent antimony in DDH4J-2012-7.

Teuton’s president, Dino Cremonese, said ”[t]hese 4J’s results represent the third successful exploration program undertaken in 2012 on Teuton ground located due south of Pretium’s prolific gold-silver Brucejack property.

 

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