After eight weeks of declines in net speculative length, last week’s market comment reported a positive turnaround ahead of Fed Chairman Ben Bernanke’s congressional testimony. Hopes for an indication of further quantitative easing (QE) were shot down. Before that positive positioning in COMEX silver could become a trend, the tides reversed again. Silver was the only precious metal to experience a decline in net speculative length for the week ended June 12, dropping by 26.7 tons.
The data released on June 15 shows that futures players were uneasy about betting against silver. However, they were equally, if not more so, unwilling to bet on the metal, states a Standard Bank market note.
ETF investors were a bit more optimistic, and added 117.9 tons of metal to their holdings.
Investors started this week with the news that the Greeks have elected a pro-bailout government. Though this outcome was generally considered positive, questions remain as to whether and when the country will manage to form a coalition government.
Silver was unable to hitch its wagon to its positive-moving peers on Monday. In the morning, when industrial metals like copper and platinum made gains, silver moved down with gold. Later in the day, when gold found support and moved up, silver got left behind. The white metal did manage some upward spurts during the day, but these were driven back down. Following the close of floor trading, July silver was up a single penny. Spot prices closed the day flat, repeating Friday’s price of $28.74.
Widely held QE hopes were clearly not providing support for silver as the two-day Federal Open Market Committee meeting began on Tuesday. Spot prices declined that day, falling to $28.42.
By Wednesday afternoon the verdict was in: the Fed will take action, but not in the form of more QE. Instead, Operation Twist, a bond-buying program, will be extended to the end of the year. Originally the program was expected to end at the close of this month.
Silver declined, with spot prices closing in New York at $28.12.
In addition to the lack of easing, the silver market also had to digest the Fed’s downgrading of this year’s economic outlook, citing “significant downside risks” for the US economy.
That news was aggravated by negative Flash Markit PMI data on Thursday. Though US manufacturing saw growth, it was the weakest rate in eleven months. Activity in the EU declined at the fastest rate in three years. Perhaps more upsetting for silver investors are estimates showing that the weakness extends to China, whose manufacturing appears to have contracted at the fastest pace in seven months.
With no aggressive monetary policy and the markets shaken by concerns of a global slowdown, it was no surprise to watch silver prices dive deeply into the red during US trading on Thursday.
After the close of floor trading, COMEX spot silver was down $1.24 at $26.88. Silver mining stocks were almost all in the red. The Global X Silver Miners ETF (ARCA:SIL) was down about 6.7 percent at 4 p.m. EST.
Endeavour Silver (NYSE:EXK,TSX:EDR,FWB:EJD) acquired the option to purchase the Lourdes silver-gold property in Mexico, a site accessible by paved roads and located within an hour of the company’s Guanajuato mine.
The option allows Endeavour to purchase 100 percent interest in Lourdes for $350,000 over three years, subject to a 3 percent net smelter return royalty of which 2 percent can be purchased at any time for $2 million.
Sunset Cove Mining (TSX:SSM) completed the second diamond drill hole at the Carolay silver property in Peru. The company also announced that it is set to begin surface exploration work on the Maranon sector of the property.
Gunpoint Exploration (TSXV:GUN) announced that it reached an agreement with Chesapeake Gold (TSXV:TGK) to purchase 100 percent interest in the El Escorpion silver project in Eastern Guatemala. The transaction is subject to the approval of the TSX Venture Exchange.
Securities Disclosure: I, Michelle Smith, do not hold equity interests in any of the companies mentioned in this article.
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