Silver Leads Relief Rally, Then Declines

Silver Leads Relief Rally, Then Declines 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.

The close

After the close of the US day session, March silver on the COMEX was down $0.56 at $30.44, near the session low. New York spot prices closed at $30.10, with losses of $0.88 for the day.

Standard Bank warned that Friday's US employment report could further weigh on the metals market.

Bears continue to possess the near-term technical advantage as several support levels were breached with the post-rally decline. Solid technical support remains at $29.63, the December low. $31 is a level of first resistance.

Company news

First Majestic Silver (NYSE:AG,TSX:FR) named Salvador Garcia Ledezma its vice president of operations. The company said it created the position to reinforce its team for future growth in operations and new projects, all of which Ledezma will now be responsible for.

Santacruz Silver Miing (TSXV:SCZ) filed an updated technical report for its San Felipe project in Sonora, Mexico. A technical report was also filed for its Rosario project in San Luis Potosi, Mexico.

Rainbow Resources (TSXV:RBW,OTCQX:RIINF) reported that drilling in the Southern section of its Gold Viking property in British Columbia intersected near-surface, high-grade silver.

Highlights include a preliminary silver value of 1.9 oz/ton over 6.2 feet between a depth of 15.4 and 21.6 feet for drill hole GV-12-04. The also company reported that some samples returned over-limit silver grades; these are being re-assayed for precise silver values.

Homestake Resource (TSXV:HSR) closed its non-brokered private placement of flow-through units by issuing 4,852,500 flow-through units for gross proceeds of $970,500. It also closed the first tranche of its non-flow-through private placement by issuing 4,179,001 non-flow-through units for gross proceeds of $626,850, raising an aggregate of $1,597,350.


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

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Silver Leads Relief Rally, Then Declines from Silver Investing News