Silver started the week on a positive note as it followed gold's upward move. The metals' gains were driven by optimism about the fiscal cliff deal, which President Obama has now signed into law. With the potential of a serious recession averted, at least temporarily, silver closed 2013′s first trading day with further gains, up $0.63 at $30.98.
“Silver has been the main mover today [among precious metals] with physical and speculative buyers evident, but as with gold on low volume,” said Triland Metals of Wednesday's relief rally.
CME Group noted that some traders were optimistic that the white metal's rise, which boosted it back above its 200-day moving average, would provide technical support.
“The close above $30.68 has shifted our view from bearish to neutral,” said Scotiabank.Still, investors were warned not to plant their feet too firmly on the ice as there were risks that the rally would not hold up. While US lawmakers reached a compromise with the fiscal cliff deal, they did not address all of the issues on the table. Still to be debated is the debt ceiling, which the nation has technically already reached, and the allegedly disastrous spending cuts, which have only been postponed until March 1. Before that deadline, lawmakers, now infamous for their bickering, need to display the ability to work together once again. “What we got basically amounts to giving the markets a very high octane energy drink," said Sterling Smith, futures specialist at Citi Institutional Client Group. “But that will in fact start to wear off as we move back into the controversy again, which will happen probably sooner rather than later.” Thursday, as the media emphasized the shortcomings and criticism surrounding the fiscal cliff compromise, and the dollar index hit a four-week high, the euphoria in the silver market faded. Also pressuring silver was the release of the minutes from the Federal Reserve's December meeting, which revealed that some members feel that bond purchases should be reduced or stopped before the end of 2013.