Silver is way over $5.50......Terzah owes you an article!
THC
February 5, 1999
Commodities
Silver Futures Prices Rise For Fourth Straight Day
By TERZAH EWING
Staff Reporter of THE WALL STREET JOURNAL
They may not be keeping pace with Internet stocks, but silver prices are enjoying a bull run. The trouble is, like some Internet stocks, momentum has as much to do with the move as fundamentals.
Silver futures turned in their fourth-consecutive day of gains at the New York Mercantile Exchange's Comex division Thursday, rocketing up nearly 22 cents to levels the nearest-month contract hasn't seen since July 23. Dince the beginning of January, silver has gained more than 80
cents.
What gives? The rally began with heavy demand for the metal in London last week as a rush of silver borrowing drove lease rates up. Traders said the rally is a spectacular example of what happens when short, or bearish, positions get squeezed. As prices rise, traders with short positions are forced to buy the metal to cover their bets. That, in turn, sends prices even higher.
Then, as prices climbed, technical traders, or traders who buy and sell a commodity based on historical price trends rather than supply and demand figures, began buying silver, too. "There's tremendous technical buying, primarily by [hedge and commodity] funds," said Scott Meyers, senior analyst at New York-based Pioneer Futures. "Everybody's buying. They're afraid to sell into this."
Dinsa Mehta, managing director of global commodities at Chase Manhattan, said, "For silver, people no longer need to know why. They just need to know something's happening and they hop on."
The March silver contract rose 21.7 cents to settle at $5.76 a troy ounce. May futures also rose but not as sharply, indicating traders want the metal as soon as possible. The May contract ended the day up 21.4 cents at $5.768 an ounce.
Technical traders and momentum-following speculators also were peculating about who or what was behind the initial borrowing and buying in London. Some said the London Metal Exchange's plans to launch a silver contract by the middle of this year already could be causing a movement of the metal from New York to London. Certainly Comex silver stockpiles have fallen throughout the rally and stand at about 74.4 million troy ounces.
But though rumors about the LME and about various hedge funds and European trading houses were bandied about in the market, no one could confirm the original source of all the bullishness.
"Somebody's been buying London physical [silver] for two weeks, and there's a good premium for [immediate] delivery," said George Gero,senior vice president of investments at Prudential Securities in New York. "Somebody's been saying this is a bullish market."
Mr. Mehta noted that the bullish mood, which infected other precious-metals markets Thursday, seems credible. "The stories that talk about a rebound in Asian demand are more credible. The rallies across base metals are more credible," he said. "This is providing a good undertone for whoever is making the run in silver to be joined by the
usual groupies."
Some traders said the rally could stall a bit today because of unwillingness to carry large bullish bets over the weekend. But most analysts said they see no end in sight to the rally. Mr. Meyers of Pioneer said the market could well head as high as $6 an ounce before the rally peters out. London-based analysts at Macquarie Equities Ltd. cited a more modest short-term target of $5.80. |
