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Silver Prices May Ride Momentum Higher

Silver may extend gains this week on bullish momentum indicators and the continuing impact of the European debt crisis.

NEW YORK (TheStreet) -- Momentum indicators suggest a bullish outlook for silver this week. The European debt crisis will continue to impact the markets and likely will increase the demand for silver. Meanwhile, a majority of the economic data releases in the U.S. are expected to have a mixed impact on the dollar.

Silver is witnessing crucial support levels at $17.18 an ounce and will likely trade higher in the short term. The momentum indicator RSI (14) has reached 0.53 levels, signaling northward movement in silver prices. Overall, we expect silver metal to trade higher during this week.

Last week, silver July futures on the COMEX witnessed an uptrend by reversing the previous week's trend. After reaching higher levels of $18.53 an ounce, the white metal settled at $18.23 an ounce, gaining 5.3% overall last week. The benchmark MSCI world index recovered nearly 2%. Base metals also recovered by 0.9% on LME.

iShares Silver Trust

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maintained its holdings at 9208.83 tons last week. The gold/silver ratio dropped to 67.48 from 70.39 as silver rose more than gold. Gold advanced 1% last week, in comparison to silver's 5.3% gain.

Silver prices for spot delivery on COMEX closed at $18.25 an ounce, while futures ended at $18.23 an ounce, suggesting that silver prices are in backwardation. In contrast, gold prices for spot delivery on COMEX closed at $1226.7 an ounce, while futures ended at $1230.20 an ounce, suggesting that gold prices are in contango.

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Calendar spread, difference between the two future contracts, between silver Jul'10 and Sep'10 continued to remain thin at -0.044, suggesting that far month contracts closed higher than the near-month contract. Meanwhile, calendar spread between gold Aug'10 and Oct'10 contracts closed at -2.10 during last week.

All major silver stocks gained last week on the upward momentum in silver commodity prices.

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Silver Wheaton



Pan American Silver

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gained 7.24% and 5.15%, respectively.

Other producers,

Silver Standard Resources



Hecla Mining

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Compania de Minas

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Endeavour Silver

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Coeur d'Alene Mines

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were up 6.41%, 5.78%, 5.77%, and 4.55%, respectively.