Silver Dips Below $5 An Ounce
The price of silver closed at a lackluster $4.98 an ounce Thursday, the first time the metal has closed at under $5 an ounce this year.
Expectations of having $6 an ounce silver have once again dissolved. Analysts cited the usual suspects of a weak metals market for the declines: lack of investor interest in precious metals and traders “shorting” the market, or betting that metals prices will fall.
Market watchers note that silver fabricators have needed more of the white metal than mines have produced. That puts pressure on above-ground reserves, which, in simple economics, should in turn make silver more valuable.
But the success of the stock market and even bonds has turned investors away from silver and gold, said Ted Kempf, an analyst for the CPM Group Ltd. in New York.
“That left the market open to being shorted by traders,” Kempf said. “It’s been a tough three months in the metals market.”
When traders “gang up” on the silver market and short the futures of the metal, the price goes down. Silver prices directly affect the earnings of mining companies in the region.
“We’re in this business for the long haul,” said Tony Ebersole, director of investor relations for Coeur d’Alene Mines Corp. The company, along with partner Asarco Inc. of New York, reopened two mines in Idaho’s Silver Valley, partly on hopes that silver prices would rise.
The Coeur Mine currently runs at full capacity, while development work continues at the nearby Galena Mine, Ebersole said. Despite the weak prices, the company has no plans to scale back its operations.
The market appears close to bottoming out, Kempf said. He predicts the price won’t drop much below $4.95 an ounce, and if the metal can rally past $5.20, it could move back well above $5.50 an ounce.
“The fundamentals are still very positive,” he said. “It’s just going to take some factor to get the market to respond once again to those fundamentals.”
The silver market took a similar dip back to the $5 an ounce level in early July of last year. Trading on the market during summer months tends to be light, and that makes the market more open to manipulation, he said.
, DataTimes