Silver still seems to be looking for a development that will provide the market with direction. While waiting for that to come, the metal has stayed within a tight range that has not allowed it to close above $32 in the past week.
Silver diverged noticeably from gold this week. On occasion, silver was up while its yellow peer was down, but silver also spent a lot of time underperforming. There was some speculation that silver was disconnecting from gold because it was beginning to veer toward its industrial track. That has not been confirmed and in fact may not be true as if that was the case, the metal would be likely to trade in tune with the likes of copper. However, there were occasions — such as Wednesday night — when copper was making positive moves and silver was not. Robin Bhar of Societe Generale said the recent gold and silver price action, along with underlying investor activity, suggests that bullish undercurrents are starting to support the metals, with silver leading. However, Bhar warned that a rise for silver is likely to be short-lived. A surplus equivalent to more than seven weeks of global industrial demand is expected this year, and the firm does not expect investors to consume all of that metal. Some bulls are likely finding encouragement in the rising open interest (OI) in COMEX silver and the fact that net speculative length as a percentage of OI has been increasing. It is now back over 20 percent, which is above the five-year average. The latest Commitment of Traders report shows a healthy 477-metric-ton (MT) addition to net speculative length for the week ended February 1, bringing the total additions for the previous two weeks to more than 930 MT.