German Interest Rate Cut Fuels Rally In Silver Prices Buying By Big Investors Helps Push Price Up 62 Cents Over Three Days

The price of silver went on its best ride since the 1980s Thursday, but analysts say the rally may be short-lived.

Silver rose 46 cents to close at $5.22 an ounce on the New York Comex spot market, and local mining stocks followed the lead. In the last three days, silver has risen nearly 62 cents.

The industrial metal has been bouncing around the $4.60 an ounce level since the beginning of the year. The market’s volatility should continue, analysts say.

Several factors pushed the price up Thursday, said Joe Rosta of the CPM Group Ltd. in New York. The lowering of German interest rates pushed gold prices up, and silver with it, he said.

Some big investors entered the silver market, pushing the price through what traders call “resistance levels,” where many buyers enter the market at a certain price. A lot of traders who had “shorted” the metal in hopes that it would fall in price had to cover their positions by buying more silver.

Those factors together resulted in the sizeable price hike. Ron Nicklas, a metals analyst with Penaluna Inc. in Spokane, said clients of his who buy silver were surprised by the sudden move.

“A lot of people had been sitting on their hands looking at the metal,” Nicklas said.

But several factors suggest the big gain could evaporate today. Rosta at CPM said the increase was probably “too much, too fast,” and that traders will sell the metal and take profits.

Bill Booth, head of investor relations at Coeur d’Alene’s Hecla Mining Co., said Fridays in the silver market have been traditional profit-taking days. “You hope a move like this one will stick.”

For months, mining executives and many analysts have said that the demand for silver far outstrips the supply, and the silver market eventually would have to start responding to the fundamentals.

Local mining companies need to see more consistent increases in silver prices before considering changing operations, said Tony Ebersole of Coeur d’Alene Mines Corp.

The metals rally pushed most local mining stocks up Thursday. Hecla closed up $1.13 at $11.13; Coeur d’Alene Mines up $1.25 at $18.50; Gold Reserve Corp. down 6 cents at $6.81; Sunshine Mining & Refining Co. up 38 cents at $2; and Pegasus Gold Corp. up 50 cents at $12.25.