Hete is an extract from a fresh Kitco piece on the outlook for silver This is just part of the R
Piece. It quotes a guy I know and think highly of, Adrian Day.
S: Silver Posts Strong 2012 So Far; Will It Continue?
01 February 2012, 2:41 p.m.
By Debbie Carlson
Of Kitco News
kitco.com
(Kitco News) - Commodities put in a strong January performance, but few markets earned as much as silver did in the first month of 2012, gaining 20% during the period.
That put silver in second place for the strongest commodity futures markets, beaten only by orange juice.
As February dawns, silver continues to build on its gains, but it is hitting some resistance as it targets the $34 an ounce level. On Wednesday, March silver futures on the Comex division of the New York Mercantile Exchange settled at $33.837 an ounce.
Silver has been on a solid uptrend since hitting a low of Dec. 29 of $26.1450 for the March contract.
Adrian Day, president, Adrian Day Asset Management, said much of the reason why silver rallied so much in January was because it had fallen so much during December. On Nov. 30 March silver settled at $32.804 and on Dec. 30 it closed at $27.915, a 15% swoon in one month alone. Silver wasn’t alone in its December descent, many other markets including gold and other commodities tanked in December. Likewise, many commodities rose last month.
Day said silver’s trip under $30 may have enticed bargain hunters who were able to pick up the metal at prices not seen since late September.
January witnessed a sharp pick up in physical coin buys, Day said. The U.S. Mint said sales of American Eagle silver coins were the second highest ever last month, although part of the rise was because of seasonal beginning-of-year effect. (See related story)
Day attributed the rise in silver’s price simply to market factors, like price having fallen so much previously, rather than any change in fundamentals for the metal or particularly strong investment demand.
NOW WHAT?
January’s rally for silver returns the market to just above where it was prior to the December break. So far it is bumping into resistance at the $34 area, and Day said that’s not surprising given that silver found a ceiling at that price level before.
Darin Newsom, Telvent DTN senior analyst, said he believes that silver - and gold for that matter – are due for a correction, but he admitted that he’s “feeling like he’s on an island.”
Just as commodities were oversold in the December break, Newsom said the precious metals seem overbought at current highs.
Where silver goes from here will depend on economic news, Newsom said, given that the metal can be affected by both its status as a precious and industrial metal.
“I think we can see a sell-off in February, but to what degree I’m not sure. A lot would depend on the dollar firming. If that happened it would put pressure on the industrial metals, both silver and copper. We haven’t seen the groundswell of really bullish economic news,” he said.
Day said given the underlying support for silver, which in part comes from the ultra-loose monetary policy by the Federal Reserve, the metal’s long-term outlook remains solid. “I think we’re more likely to $40 before we see $27 again,” he said. |
