Thursday, 30 June 2011
Silver rises on speculative trade, gold declines
Silver ready (.999 fineness) hardened by Rs 490 per kg to end at Rs 52,945 from Wednesday's close of Rs 52,455. Standard gold (99.5 purity) dipped by Rs 65 per 10 grams to conclude at Rs 21,965 from Rs 22,030 yesterday. Pure gold (99.9 purity) also fell by a similar margin to finish at Rs 22,070 as against Rs 22,135 previously.
In New York, precious metals rallied along with other commodities after the Greek Parliament approved a package of additional austerity measures. Gold for August delivery gained USD 10.20 to USD 1,510.40 an ounce on the COMEX division of the NYMEX.
Silver for July delivery gained USD 1.11 to USD 34.75 an ounce.
Source: http://www.moneycontrol.com/news/commodities/silver-risesspeculative-trade-gold-declines_561678.html
Monday, 30 May 2011
Silver Futures Climb, Gold May Advance on Europe Debt, Inflation Concerns
Silver for July delivery jumped as much as 1.4 percent to $38.395 an ounce, extending last week’s 7.9 percent gain, in electronic trading on the Comex in New York, and traded up 0.4 percent at $38 at 12:21 p.m.London time. Immediate-delivery gold was little changed at $1,537 an ounce, while bullion for August delivery was 0.1 percent higher at $1,538.80 an ounce on the Comex in New York. Gold in Shanghai rose to an all-time high of 319.92 yuan ($49.34) a gram today.
Greek Prime Minister George Papandreou said he’ll press ahead with new austerity measures even as he failed to win backing from opposition parties. Commodities, measured by the Standard & Poor’s GSCI Index of 24 futures, rallied for a third week last week after the Group of Eight leaders said the global economy is strengthening.
“Gold’s uptrend remains in place, with people being fidgety about Europe’s debt crisis,” said Chae Un Soo, Seoul- based trader with KEB Futures Co. “The metal is going to approach a record this week where it also could face heavy sell- offs to moderate rapid gains in prices.”
Bullion is extending a 10-year winning streak, touching a record $1,577.57 an ounce in London on May 2, as European policy makers seek ways to restore investor confidence amid increasing concern that Greece won’t be able to repay its debts after last year’s 110 billion euro ($157 billion) bailout.
‘Bull Market’
Seventeen of 19 traders, investors and analysts surveyed by Bloomberg said bullion will rise this week, while one saw a decline and one was neutral. Assets held in exchange-traded products, or ETPs, stood at 2,057.679 metric tons as of May 27, compared with a record holdings 2,114.6011 tons in December, according to data compiled by Bloomberg.
There is “a bull market that has years to go and would ultimately carry gold and silver prices to multiples of their recent highs,” Jeffrey Nichols, managing director at American Precious Metals Advisors, wrote in a note.
China National Gold Group Corp., the state-owned company that controls the nation’s largest gold deposits, wants to invest in projects in Africa as it expects bullion to trade near record levels for the next three years.
“We aim at large-scale mines with good potential in countries that have close ties with China and domestic stability,” President Sun Zhaoxue, 48, said in an interview in Shanghai. “Gold prices will foreseeably fluctuate at historically high levels for another three years.”
Silver for immediate-delivery rose 0.1 percent to $38.05 an ounce. Spot palladium fell 0.3 percent to $759 an ounce, while platinum was little changed at $1,801.63 an ounce.
Silver prices settle, but sales continue to soar
Last month, silver prices skyrocketed to an all-time high of $48 an ounce, causing many Americans to rifle through their jewelry boxes, attics and drawers for old necklaces and other silver trinkets.
Silver is now trading at about $35 an ounce, but with gas and food prices soaring, people still are looking to raise some money by unloading their shiny objects.
Ordinarily playing second fiddle to gold, silver came into the spotlight when the price per ounce hit $25 in late 2010 and continued to soar.
"It's doubled since last year," Michael Toback, owner of a precious metals supply house in New York City, says of the number of people bringing him silver they want to sell. Jewelry such as silver chains or charms might yield a few bucks, he says, but the real value is in heavier pieces like sterling silverware, as well as tableware like platters, candlesticks and napkin rings.
Toback says some of the people selling silver now are those who bought silver coins and bullion the last time the price came close to $50 an ounce back in 1980, only to watch it drop below $5 shortly thereafter. Many others, though, aren't hobbyist investors, but ordinary people hoping to take advantage of silver's historically high value.
Many visit pawn shops or antique stores, while others sell their silver items at Tupperware-party-style events, at which guests come in with silver and leave with cash.
Entrepreneur Lisa Rosenthal, owner of a 3-year-old company in suburban Boston that runs gold-buying parties, expanded her business early this year to capture the burgeoning interest in silver. While her associates previously bought silver from event participants as a courtesy, Rosenthal now markets silver-specific buying parties. Since March, Party of Gold's associates have been booking a couple hundred silver-buying parties each month around the country. "The quantity of silver we receive now is pretty tremendous," she says.
Dave Crume, vice president of A-OK Pawn and Retail in Witchita, Kan., and president of the National Pawnbrokers Association, says he's buying a lot more silver these days, a phenomenon which his fellow pawnbrokers report experiencing, as well. "I'm probably seeing a 300 percent increase, at least," he says.
Crume says people know their silver is worth more than it used to be, but often they don't have a good sense of how much it's gone up. "The majority of people are pleasantly surprised" when they find out how much they can earn from a tarnished pitcher or cache of mismatched flatware.
This was exactly what happened to Susan Baker, an accounting manager from Boylston, Mass.. Baker took some of her in-laws' old silver to sell last month when her husband's siblings were cleaning out the family home in preparation for putting it on the market. Baker says she had a small assortment of items — a couple of candlesticks, napkin rings, commemorative mugs and around 40 pieces of silverware — and was bowled over when the buyer offered her nearly $1,250 for the collection.
"We knew that silver had some value, but it was a pleasant surprise that it was that much," she says. "But right there on the spot, she wrote us a check."
While Baker says her family plans to put their windfall towards a group vacation, other people selling silver are pressed by economic necessity, buyers say. "In some cases, they tell me they're behind on their mortgage payment," says Larry Nyborn, co-owner of Precious Metals Reclaiming Service in Westwood, Mass. "I've heard that more than once, that's for sure."
"For the average person, their silver and gold is one of the few things that has gone up," says Phil Dreis, owner of the Antique Cupboard in Waukesha, Wis. "They're facing the problem of more expensive food and gasoline, their wages haven't gone up and a lot of sources of people's wealth have disappeared. This is one of the few that's been a success story."
Source: http://www.msnbc.msn.com/id/43082610/ns/business-eye_on_the_economy/
Tuesday, 17 May 2011
Silver Price: The Least You Should Worry About
Jeff Clark: Andy, tell us about your industry contacts and how you get the information you're privy to.
Andy Schectman: We source our product from three of the largest six primary U.S. mint distributors. Having 20 years of experience with these sources, as well as the dealers in the secondary market, we're as tied into the industry as anyone.
Jeff: You made some interesting comments to me about supply and premiums. Tell us what you’re hearing and seeing in the bullion market right now.
Andy: I feel as though I'm the boy who cries wolf or that I've been beating the same drum for too long. But in reality, it has been my feeling since late 2007 that ultimately this market will be defined less by the price going parabolic – which I think ultimately will happen – and more by a lack of supply. You see occasional reports that state it’s just a lack of refined silver or lack of silver in investable form. But as far as I'm concerned, there is a major supply deficit issue, and it’s getting worse.
Take the U.S. Mint, for example. Right now, as we talk, you can barely get silver Eagles. We’re seeing delivery delays of three to four weeks, and premium hikes of a dollar or more in the last three weeks. Most of the suppliers in the country are reluctant to take large orders on silver Eagles because they don’t know (a) when they’ll get them, and (b) what the premiums will be when they arrive.
I was talking to the head of Prudential Bache and asked him about silver Eagles. He said, "You know, as soon as the allocations come in, they’re sold out. We can't keep them in." This is coming from one of the largest distributors of U.S. Mint products in the country.
And this is all occurring in an environment that has only minimal participation by the masses. Few people in this country have ever even held a gold or silver coin. So, if it's this difficult to get bullion now, what's it going to be like when it becomes evident to the masses they need to buy? This is what keeps me up at night.
Jeff: Some analysts say it's a bottleneck issue, that the mints have enough stock but just need more time or more workers to fabricate the metal into the bars and coins customers want.
Andy: No, I don’t believe that. What business do you know that if they had that much profit potential wouldn’t increase production and hire more workers to meet demand? To me, the “inefficient model” argument is an excuse.
Look at what the U.S. Mint alone has done: they haven’t made the platinum Eagle since 2008. They make maybe one-tenth as many gold Buffalos as they do gold Eagles. They’ve made hardly any fractional-ounce gold Eagles. Heck, they can’t even keep up with the demand for the products they do offer. Does that sound like a bottleneck to you? Or is it because there is far more demand than there is available supply? It’s pretty clear to me it’s the latter.
Jeff: What are you seeing in the secondary market; are investors selling bullion?
Andy: There is no secondary market. Absolutely none. Nobody is selling back anything, at least not to us. Think about that: if this was a traditional investment and your portfolio went up 100% in the last year, like silver has, you’d think some investors would take some profits and ride the rest out – but nobody’s selling anything.
This is why I think the lack of supply is the single biggest issue in this market. And in time, I think it will become much more obvious. [Ed. Note: We’re using the term “secondary market” in this instance to mean sellers of bullion and not the scrap market.]
There are only five major mints – U.S., Canada, South Africa, Austria and Australia. Yes, there is a Chinese Mint and a couple Swiss Mints and some private refiners, but they amount to very little in the overall scheme of things. We’re in a situation where the mints are limiting the selection and raising the premiums, and this is occurring at a time when most people own no bullion. As it becomes more apparent that people want bullion instead of paper dollars, I think you'll see premiums go parabolic and supply get even tighter.
Jeff: Are you getting a lot of new buyers to the bullion market?
Andy: More than ever. One of the interesting things we’re seeing is a lot of younger people dipping a toe in the water, buying little bits of silver here and there. We’re also seeing bigger orders, as well as more frequent phone calls from financial advisers asking us if we can help their clients. So yes, the base is broadening.
Jeff: That's very interesting. So are you seeing more demand for gold or silver right now?
Andy: 90% of the new business is in silver. And I think that’s indicative of the state of the economy. People are trying to get into precious metals, but they think gold is too high. I think they’re buying silver because they realize the fundamentals for owning gold also apply to silver. They think the profit potential is better in silver, too. This has actually made the supply for gold better than it is for silver right now, and a lot of that has to do with price.
Jeff: Why are premiums fluctuating so frequently?
Andy: Premiums are almost impossible to gauge right now. Because the availability of product is getting smaller and smaller and the demand is getting stronger and stronger, premiums are changing literally overnight. And it doesn’t take many large investors around the country to force premiums higher.
The net of this is that it's really hard for us to be able to say what the premium for a specific product will be two weeks out.
Jeff: You mentioned increased interest from fund managers. Tell us the kind of comments you’re hearing and why they’re buying bullion.
Andy: I think it’s coming from their clients. It’s my impression that people are taking it upon themselves to study a little bit more, to be more accountable for their assets, and I think they’re telling their financial advisors to buy gold. And in some cases it’s because they don’t want a paper derivative.
It’s no secret that financial advisors don’t like gold and silver. Once money goes to a bullion dealer, it’s not coming back to a stock portfolio anytime soon, so they discredit it. But now it’s my impression they’re being asked by their clients to buy it. So it’s not necessarily because the financial advisor wants gold as much as it is the client requesting it.
Here’s a good example. There’s a firm here in Minneapolis that represents the Pillsbury fortune, and they asked me to talk to their partners about precious metals a few months ago. At the end of the conversation they said, "Okay, we're going to place an order for one of our clients.” Upon hearing it was for one client, I thought it would be in the range of $50,000 to $100,000. Well, the order was for $5 million.
There are two astonishing things about this. First, that’s twice as big as the largest order I've ever had. It was one order, for one client, who’s brand new to the market. How many more potential buyers are out there like that? Second, they made it abundantly clear to me that it was out of pressure from one of their clients that they sought me out. So clients are increasingly demanding bullion, regardless of what their financial advisers say.
Jeff: Hearing about all this new buying might make some think we’re near a top in the market. Could that be the case?
Andy: No, no [chuckles]. I think Richard Russell says it best: "Bull markets die of exhaustion and overparticipation." Well, we’re nowhere near that point when so few people in this country own gold and silver. Heck, I’m a bullion dealer, and most of my peers don’t own any gold and silver! Yes, you're seeing more commercials, but there are just as many commercials to buy gold as there are to sell it. I think that’s an indication this market is not exhausted.
Remember that in the year 2000 everyone and his brother had some NASDAQ shares. That’s an example of an exhausted or overparticipated market. We’re nowhere near that.
Jeff: Where are the best premiums for silver?
Andy: The very best buy in silver right now is junk silver. And by the way, I think the term “junk” is unfair. It isn't junk anymore. It used to be junk in the ‘90s when silver was 3 or 4 bucks an ounce and it was sold basically at melt value and carried no premium. So I’d call it “90% dimes and quarters.” Anyway, junk silver has the lowest premium right now and, in my opinion, offers the best upside potential.
Next would be 10- and 100-ounce silver bars. And then one-ounce silver coins – but the Eagles are very expensive at the moment, if you can get them. The Austrian Philharmonic has the best value in a one-ounce silver coin right now, and they’re available. But again, premiums for all silver coins are escalating.
Jeff: What about gold?
Andy: Gold is not as bad. In fact, I would say that gold availability is decent right now for one-ounce coins and bars. There isn’t much available in fractionals. And Buffalos are still kind of hard to get. Other than that, the one-ounce coins with decent availability are Canadian Maple Leafs, Australian Kangaroos, and Krugerrands. And they all have decent premiums.
Jeff: So the take-away message is what?
Andy: First, I think you said it best with your recommendation to “accumulate.” Not only will it smooth out the volatility in price and premiums you pay, it will also give you a bird in the hand. If I'm right about this market, and I really believe I am, it will be defined by lack of availability of refined product. To combat that, just accumulate month in and month out, and be thankful when you're able to get what you want.
Second, it’s about the number of ounces you own. You want to get as many ounces as you can without being penny wise and pound foolish. Stick with the most recognized products – don’t buy 1,000-ounce bars, for example, because they’re illiquid. You want to maximize your liquidity, and you do that by buying the most common forms of bullion – one-ounce coins, bars, and rounds; 10- and 100-ounce products; and junk silver.
Last, keep in mind that premium and commission are two different animals. Commission is what the dealers make on top of the premium. Premium is what the industry bears. So if the U.S. Mint is selling silver Eagles for $3 over spot to the distributors, that's before they’re marked up to the public. So even though the “premium” is high, you're actually going to get most of that back when you sell. [Ed Note: It’s not uncommon for the buyer to recapture most of the premium when they sell, particularly during periods of high demand.]
So, buy gold and silver while it’s available, even if you don’t buy it from me, because if I'm right, getting it at all could soon be your biggest challenge.
Jeff: Thanks for your insights, Andy.
We just concluded our spring Casey Summit, "The Next Few Years," a truly blockbuster event that included detailed investment recommendations from 35 of the most successful experts. We covered all facets of precious metals, energy, interest rates, the economy, real estate, and more. It's the single best way to prepare both your finances and family for what's ahead. You can catch every minute of the entire Summit with a full 20-hour audio CD set, available.]
Jeff Clark
Morning Silver Market Report
Read more: http://community.nasdaq.com/News/2011-05/morning-silver-market-report(7).aspx?storyid=76243#ixzz1MehrJx5j
Silver falls, gold flat as US dollar drops
Precious metals investors were eagerly awaiting regulatory filings by hedge fund managers and institutional investments due later on Monday in the US, which will show changes in precious metal holdings in their portfolios including during the first quarter.
"Those problems around the euro zone are still there, and they might re-emerge even this week," senior market strategist of MF Global's Lind-Waldock unit Adam Klopfenstein said.
Spot gold eased 0.2 per cent to $US1,490.80 an ounce by 0616 AEST. Bullion had hit a record high of $US1,575.79 on May 2.
US June gold futures settled down $US3 at $US1,490.60 an ounce, after trading from $US1,486 to $US1,504.30.
US futures trading activity was quiet with volume below 130,000 lots, sharply lower than last week's pace and about 40 per cent below its 30-day norm.
Euro zone finance ministers approved a three-year, €78-billion emergency loan program for Portugal and said Lisbon would ask private bondholders to maintain their exposure to its debt.
Losses in bullion were limited as the dollar fell about one per cent against the euro, after the EU meeting showed support for debt-burdened countries, lifting demand for the single-currency after last week's sharp sell-off.
Gold also dragged by a more than $US2 decline in US crude futures, and as US equities ended almost one per cent lower.
Kodak adjusts pricing, cites silver
Silver fell 4.4 per cent to $US33.73 an ounce. The industrial precious metal has crashed about 30 per cent since hitting a record high of $US49.51 on April 28.
A wave of hot money from funds fuelled a rally in which the silver price nearly doubled over four months.
Managed money continued to liquidate positions even after US regulatory data showed big hedge funds and speculators cut their bullish bets in the silver futures market in the week through May 10.
US photography company Eastman Kodak, a top industrial consumer of silver, said it is adjusting its film products pricing policies in response to the "unprecedented rise" in silver prices.
Eastman Kodak said that a majority of the silver contained within its color film and paper products was removed during processing, allowing the company to use a variable pricing strategy.
Silver is a key raw material for Kodak.
"We've seen some very steep curves in commodity pricing recently, including an extraordinary rise in cost of silver," president of Kodak's film, photofinishing and entertainment Group Brad Kruchten said.
In late April, Kodak chief executive officer Antonio Perez told analysts on a conference call that "We are indexing our contracts, we are hedging, and we are moving as fast as we can with the part of the portfolio that is not silver-dependent."
On platinum group metals (PGM), refiner Johnson Matthey said that palladium attracted so much speculative money last year that it would struggle to lure enough new investors to repeat the 2011 rally.
Platinum eased six cents to $US1,755.99 an ounce.
Saturday, 7 May 2011
Soybean, Corn Premiums Fall as River Restrictions Slow Demand
Cash premiums for soybeans and corn shipped in May to terminals near New Orleans fell relative to Chicago futures after the U.S. Coast Guard restricted barge traffic on the Mississippi River because of flooding.
The spot-basis bid, or premium, for soybeans delivered this month was 58 cents to 64 cents a bushel above July futures, down from 60 cents to 67 cents yesterday, U.S. Department of Agriculture data show. The corn basis was 56 cents to 57 cents a bushel compared with 56 cents to 58 cents.
“Barge shipments will be very slow the next several weeks, until the water gets flushed out into the Gulf of Mexico,” said Dave Marshall, a farm-marketing adviser for Toay Commodity Futures Group LLC in Nashville, Illinois. “Basis deteriorated on uncertainty about grain shipments and slowing export demand.”
Soybean futures for July delivery rose 4.25 cents, or 0.3 percent, to $13.26 a bushel on the Chicago Board of Trade, the first gain in five sessions. The price fell 4.9 percent this week.
Corn futures for July delivery fell 22.5 cents, or 3.2 percent, to $6.8625 a bushel in Chicago, capping a 9.3 percent drop this week.
The Coast Guard closed a five-mile portion of the Mississippi near Caruthersville, Missouri, for eight days because of the imminent danger of vessel wakes topping a flood wall. Water levels rose to a record 47.57 feet (13.9 meters) today, above the previous peak of 46 feet in 1937. The river is forecast to crest in New Orleans about May 23.
“It’s going to be several weeks before barge shipping returns to normal,” Marshall said.
Soybean tumbles on global cues
Soyabean yesterday we have seen that market has moved -0.71% tracking a drop in the U.S. market and as demand for Indian soymeal softened after key buyer China cut purchases.
The weekly export inspections report released on May 2, 2011, which showed soybean exports at just 5.525 million bushels as compared with 11.0 million last week and 12.49 million bushels needed each week to reach the USDA projection for the year.
At the Indore spot market in top producer MP, soybean dropped -20 Rs to 2334Re 100 kgs. Market has opened at 2375 & made a low of 2363.5 versus the day high of 2380.
The total volume for the day was at 32930 lots and the open interest was at 135420.Support for soyabean is at 2361 below that could see a test of 2354. Resistance is now seen at 2378 above that could see a resistance of 2387.
Trading Ideas:
Soyabean trading range is 2354-2387.
Soyabean dropped tracking a drop in the U.S. market and as demand for Indian soymeal softened
Soyabean is taking resistance at 2378 and support is seen at 2361.
Soybean exports at just 5.525 million bushels as compared with 11.0 million last week -USDA
At the Indore spot market in top producer MP, soybean dropped -20 Rs to 2334Re 100 kgs.
Courtesy: Kedia Commodities
(Source: http://www.commodityonline.com/futures-trading/tradingtips/Soybean-tumbles-on-global-cues-12820.html)
Silver ends losing streak, rises over 3%
Possible for white metal to touch Rs 59,000 a kg by month-end, says trade body
Silver ended its nine-day losing streak and closed higher today in Mumbai’s spot market. It closed on the positive side by over 3 per cent at Rs 56,085 per kilogram from its previous close of Rs 54,305 per kilogram. Since April 28, silver had plummeted more than Rs 18,000 or 25 per cent on profit booking as it had witnessed a sharp rally earlier. It touched an all-time high of Rs 75,020 per kilogram on April 25.
Demand for the metal has emerged at lower levels, which has caused the precious metal to bounce back.
“Rs 50,000 to Rs 52,000 (per kilogram) is a good level to buy silver,” said Prithviraj Kothari, president, Bombay Bullion Association.
By the end of this month, it is possible for silver to touch Rs 59,000 per kilogram, Kothari said.
Profit booking at higher levels had caused silver to see a steep drop. On the Chicago Mercantile Exchange (CME), the sharp fall in prices was attributed to heavy profit booking in silver when the white metal reached an all-time high of $49.8 in the COMEX market. CME said it would raise margins from May 9 to $21,600 per future contract from $16,200 per contract.
Also, maintenance charges were raised to $14,000 from $12,000, which would be introduced in steps. Margins are the fund that exchanges keep to allow a trader to trade, and they are raised to control volatility in a particular commodity.
(Source: http://www.business-standard.com/india/news/silver-ends-losing-streak-rises-over-3/434834/)
Silver Futures Plunge 27% in Week, Most Since 1975; Gold Rebounds on Comex
Silver futures fell, capping the biggest weekly plunge since at least 1975, on mounting sales by investors following increases in Comex margin requirements. Gold rebounded, halting a three-day slide.
Silver tumbled 27 percent this week after CME Group Ltd., the Comex owner, boosted the cash amount needed for a speculative position by 84 percent in two weeks. Yesterday, holdings of the metal in exchange-traded products dropped the most in three years. Gold had the largest weekly drop in a year.
“At the close of business on Monday, silver’s got another bump in margins,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Gold doesn’t have the technical breakdown that silver’s had. All gold has to do is hold its value when everything else crumbles around it.”
Silver futures for July delivery fell 95.3 cents, or 2.6 percent, to settle at $35.287 an ounce at 2:11 p.m. on the Comex in New York. On April 25, the price reached $49.845, a 31-year high.
The minimum amount of cash that must be deposited when borrowing from brokers to trade will rise to $21,600 a contract after May 9, CME Group said on May 4. That’s an increase from $11,745 two weeks ago.
“The higher cash-margin requirements simply cannot be met by all participants, and when a trader can’t make margin, the underlying security is often liquidated,” Lachlan Shaw, a commodity analyst at Commonwealth Bank of Australia (CBA), said in a report. “Further silver-price falls are possible.”
ETP Holdings Tumble
Silver assets held in ETPs tumbled 3.6 percent to 14,546.99 metric tons yesterday, the biggest decline since Jan. 2, 2008, while gold holdings fell 0.7 percent to 2,057.08 tons, the biggest drop in three months, according to data compiled by Bloomberg.
The liquidation in precious metals has been “egregiously violent,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. “Speculative fervor needed to have a bit of cold water splashed in its face.”
Gold futures for June delivery rose $10.20, or 0.7 percent, to $1,491.60 an ounce. Yesterday, the price touched $1,462.50, the lowest since April 14. This week, the metal dropped 4.2 percent, the most since May 2010.
“Gold below $1,500 is a line in the sand,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “There’s a scramble for gold because a lot of people don’t want to miss the move up.”
The metal reached a record $1,577.40 on May 2.
Barclays Capital recommended buying gold after the 4.9 percent drop in the previous three days.
Palladium futures for June delivery rose $5.50, or 0.8 percent, to $716.30 an ounce on the New York Mercantile Exchange. This week, the metal dropped 9.6 percent, the most since July.
Platinum futures for July delivery gained $8.20, or 0.5 percent, to $1,786.40 an ounce. This week, the price dropped 4.2 percent, the most since November.
Silver Drops 27% After 30-month Rally
Silver dropped the most last week reminding investors of the sudden move in the metal in 1980 and the volatility in Internet stocks in the late nineties. The recent surge in trading volume in silver indicates a strong interest from retail investors that may presage lower prices ahead.
The price of silver tumbled this week reminding investors of the sudden decline last seen in March 1980. The thinly traded silver future plunged this week 27%.
The May future dropped 2.6% on Friday to $35.06 an ounce and more actively traded June contract declined 2.6% to $35.63. In the week, immediate delivery gold future dropped 4.1%.
The sudden reversal in silver dragged down prices of gold, crude oil and copper but commodities traders remain divided on the future direction of silver price.
The closely watched ratio of gold and silver prices had shot up to 63 before last week and declined to 42 at the end of the week, but still above the 30-year average between 30 and 35.
After the financial markets meltdown in 2008, silver prices dropped to as los as $9 an ounce and shot up to $50 in the last 30 months.
Optimistic investors’ view the latest price decline as opportunity and make the case that the U.S. dollar’s recent gain is temporary and the dollar remains in the long term decline.
The elevated U.S. government budget deficit and rising commodities prices have fueled inflation that the Fed has still not recognized and views as “transitory.” The ongoing inability of the U.S. government and politicians to focus on cutting total deficit has emboldened many investors to increase their exposure to precious metals.
However, several large commodities traders do not see any price appreciation possibility for silver in the near term. These traders content that silver price will be anchored to gold price and the price ratio between the two is expected to hover between 35 and 40.
Of course, lot will depend on what happens to the U.S. dollar, how the euro-zone crisis evolves and gold price trajectory based on the demand from China, India and the Middle East.
However, central bankers favor gold and not silver in their holdings and so far silver has found its market among individual investors. Close examination of trades on New York and London exchanges shows that average purchase of silver tends to be less than $1,500.
The latest move in silver price also shows the sudden burst of demand from retail investors. Since last August the silver price has soared 165% and gold jumped 25%.
However, silver is prone to more sudden price reversals and is expected to test $30 price level in the next four weeks. Several commodities traders anticipate the $30 price level a crucial test for the precious metals but are also cautious to go long on gold and short silver for the next few weeks.
The recent run up in the silver price reminded hey days of days of Internet stocks trading in the late nineties.
Trading volumes in silver exchange traded fund iShare Silver Trust has rocketed from the low of weekly average of 11 million shares in 2006 to 750 million shares on April 29.
(Source: http://www.123jump.com/market-update/Silver-Drops-27-After-30-month-Rally/44121/)
Thursday, 5 May 2011
Silver Investors Dump Futures as Comex Boosts Speculator Trading Costs 84%
The biggest slump for silver since 1983 may not be over as the Comex exchange in New York makes it 84 percent more expensive for speculators to trade the metal, triggering an exit by investors.
The minimum amount of cash that must be deposited when borrowing from brokers to open new positions will rise to $21,600 per contract after May 9, CME Group Ltd., Comex’s owner, said yesterday. That’s up from $11,745 two weeks ago. Open interest in futures has tumbled about 15 percent since the exchange began raising margin requirements on April 25.
Prices may drop an additional 14 percent to $34 an ounce by the end of next week from yesterday’s closing price, according to the average forecast in a Bloomberg News survey of six analysts. Silver has more than doubled in the past year as record-low U.S. borrowing costs and a slumping dollar prompted investors to buy precious metals as alternative assets.
“You’re talking about a very volatile market, a very significant run-up in a very short period of time,” said Michael Cuggino, who helps manage $12 billion at Permanent Portfolio in San Francisco. “It went too high too fast, and exacerbating it on the downside is the increased margin requirements.”
As of April 29, the metal had soared 57 percent in 2011, the most among the 19 commodities tracked by the Thomson Reuters/Jefferies CRB Index. In the past four sessions, silver plunged 25 percent, the most since February 1983. The slump trimmed this year’s advance to 17 percent, trailing gains by gasoline, coffee and gasoil.
‘Frothy Market’
“If you have to put up that much more margin, many people simply say ‘no, I won’t do it,’ so they liquidate,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia- based Gartman Letter. “It got a bit frothy, and frothy markets need to correct.”
CME raised margins after “unprecedented high levels of volatility,” Harriet Hunnable, the managing director of metals products, said in a telephone interview from the company’s headquarters in Chicago. Silver’s 10-day historical volatility jumped to 81.19 today, the highest since March 2009. The exchange has announced five margin increases in the past two weeks.
“When markets become highly volatile, and we can see the market anticipates further volatility, then it is highly likely that we will change the amount we require,” Hunnable said. “The exchange increases margins to manage the risk people face.”
Margins Increase
Before the increases, margins were about 5 percent of the value of a futures contract, which is for 5,000 ounces. After the plunge in prices, the cost after May 9 would be about 12 percent of a contract, using today’s settlement.
Silver “went up much too fast, and if it continues to go up, that’s disaster,” said Jim Rogers, the chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1999. “I’m very happy it’s coming down nicely. I hope it comes down some more so I can buy some more. Markets are always correcting.”
The metal may reach $45 in the third quarter, said Ralph Preston, a principal at Heritage West Financial Inc., a San Diego company that specializes in futures trading. “At this point, I see some serious long liquidation and profit taking, but not an end to the historic 2011 rally.”
Rally Outlook
The rally won’t stop “until the Federal Reserve begins to aggressively hike interest rates, the Middle East simmers down, and the U.S. Commodity Futures Trading Commission concludes its multiyear investigation into supposed market manipulation,” Preston said.
Silver futures for July delivery fell $3.148, or 8 percent, to close at $36.24 on the Comex.
Prices touched $49.845 on April 25, the highest since the Hunt Brothers cornered the market in 1980. Futures rallied as investor demand rose, pushing holdings by exchange-traded funds backed by the metal up 24 percent in the past 12 months. Shares outstanding of the iShares Silver Trust (SLV) ETF, the biggest such fund, tumbled 4.7 percent on May 3, the largest slide since January 2008.
Traders who follow options markets may not be surprised by this week’s declines. The ratio of puts per call for the iShares Silver Trust rose higher than 0.9 in April, the highest since December 2008.
Record High
Silver reached a record $50.35 in January 1980 as the government investigated the Hunt Brothers’ attempt to corner the market. The brothers were forced to sell off their holdings, and the price collapsed to $10.90 in four months.
Prices may drop as low as $31 by the end of the week before rebounding, said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. On April 28, McGhee forecast $62 by the end of the year.
“Silver is a freight train,” McGhee said. “The market doesn’t change, doesn’t give up. It’s relentless, and you’re just going to get rolled over.”
India: Silver prices fall 22% in 10 days
Silver continued its downward streak for the fifth straight day by falling below the Rs 60,000-a-kg mark on Thursday due to heavy sell-off by speculators, amid a weakening global trend.
On Thursday, in Mumbai spot market, silver lost Rs 3,860 to close at Rs 58,655 a kg, 22 per cent lower to its all-time high of Rs 75,020 a kg on April 25. A fortnight ago, silver in spot market was quoted at premium of Rs 1,500-2,000 a kg compared to the landed cost due to scarcity of metal in the market which has almost disappeared as metal prices have fallen sharply globally.
Apart from profit booking by the fund houses and successive margin hikes by Chicago Mercantile Exchange (CME), the sharp fall in prices has been attributed to heavy profit booking in silver when the white metal reached all-time high of $49.8 at COMEX market.
CME said it will raise margins from May 9 to $21,600 per future contract from $16,200 per contract.
Also, maintenance charges were increased to $14,000 from $12,000, which will be introduced in steps. Margins, are the fund that exchange keeps for allowing a trader to trade and it is raised to control the volatility in a particular commodity.
In global markets, silver investors have resorted to heavy profit bookings in the last four days. Price was trading at $37.75 an ounce.
According to an analyst with Barclays, “Silver ETP (fund) holdings fell by 520 tonnes yesterday, the second-largest daily fall in ETP holdings – the largest being 555 tonnes in January 2008. Silver ETPs suffered net redemptions of 1,105 tonnes in seven days. Total metal held declined by just under 10 per cent.”
Gold, on the other hand did not see a sharp fall, declining 0.4 per cent to Rs 21,905 a kg in Mumbai spot market. In international market, gold was trading at $1,503 currently. Gold had touched all-time high of Rs 22,710 per 10g in Mumbai on April 30.
Gold found support from positive news of fresh buying by the central bank. The latest IMF statistics showed Mexico had increased its gold reserves by over 90 tonnes since January. Meanwhile, Russia increased its holdings by 18.8 tonnes to 811.1 tonnes and Thailand bought 9.3 tonnes to 108.9 tonnes in March.
“There are talks that a big market player has exited the silver market by selling huge positions,” said an analyst with domestic broking house.
The 100-day moving average of silver stood at $34 an ounce but the 200-day moving average is expected to be at $29 an ounce on COMEX spot, said Rajeev Darji, senior research analyst, Globe Capital.
Going by the technical levels, he said, Rs 47,000-50,000 a kg is a good buying level for retail investors to invest in the commodity, as the long-term outlook for silver still remains positive.
(Source: http://www.business-standard.com/india/news/silver-prices-fall-22-in-10-days/434615/)
Silver plunges for fourth consecutive day
Silver prices plunged for the fourth consecutive day on Thursday as the grey precious metal suffered its biggest correction since the billionaire Hunt brothers cornered the market in 1980.
The reversal of fortunes for silver – which until this week’s 25 per cent drop had been up 56 per cent since January – has led a wider sell-off in commodities markets, which were heading towards one of their worst one-day falls on record.
“The silver market has become even more unhinged as the week nears an end, with no sign yet that the nervous selling momentum is near petering out,” said Edel Tully, precious metals strategist at UBS.
“This has paved the way for a wider commodity slump,” she added.
On the spot market in London, silver fell as much as 9 per cent on Thursday to a six-week low of $35.82 a troy ounce.
The volatility in silver has been exacerbated by a series of increases in margin – or the amount of cash that investors must set aside to trade each contract – by CME Group, which runs the silver futures exchange in New York.
CME has raised its margin requirements five times in the past 15 days. Investors must now set aside $14,000 per silver futures contract, worth about $180,000 at current prices. The rate will rise to $16,000 on Monday.
The increase in trading costs has forced some investors to sell their futures positions if they are unable to raise sufficient cash. The changes in margin rates are a function of the increases in volatility and price rises.
Investors have also been rushing to sell silver held through exchange-traded funds.
Holdings of silver through ETFs fell by 520 tonnes on Wednesday, the second largest daily drop on record, according to Suki Cooper, precious metals analyst at Barclays Capital in New York.
Investors had withdrawn 1,105 tonnes of silver from ETFs in seven days, Ms Cooper added, a decline of about 10 per cent.
The drop in silver comes after a spectacular rally in which the metal soared 175 per cent between August last year and last week, when it rose to within touching distance of the all-time nominal high of $50 an ounce, amid widespread enthusiasm among investors.
Sales of silver coins surged to record levels as retail investors, particularly in North America, bought the metal as an expression of dissatisfaction with the perceived profligacy of the Federal Reserve and the US government and the faltering US dollar.
The tumble in silver has led the price of other precious metals lower. However, gold has managed to remain relatively unscathed compared with its poorer cousin. Since hitting an all-time peak on Monday, the yellow metal is down 5.9 per cent at $1,483 an ounce.
Platinum and palladium, the other two main precious metals, have fallen 5.2 and 10.4 per cent respectively in the past four days.
GFMS, a leading precious metals consultancy, said in its annual survey of the two metals that palladium could rally to a fresh 10-year high of $975 a troy ounce, while platinum would hit a peak of $1,925 a troy ounce this year.
However, Philip Klapwijk, the consultancy’s executive chairman, warned that before the metals hit new highs, a “summer slump” across the precious metals was “quite likely”.
(Source: http://www.ft.com/cms/s/0/6520b326-773d-11e0-aed6-00144feabdc0.html#axzz1LXeSQeOW)
Silver Set for Worst Weekly Drop Since 1975 Amid Commodity Rout
Silver futures headed for the steepest weekly decline since at least 1975 as an increase in margin requirements and slump in commodities from copper to oil prompted investors to sell precious metals. Gold is set for the biggest drop since the week to Feb. 27, 2009.
Silver for July delivery on the Comex in New York fell 4.4 percent to $34.65 an ounce at 8:48 a.m. in Singapore, taking losses to 29 percent this week as it plunged for a fifth consecutive day. Immediate-delivery gold gained 0.9 percent to $1,486.88 an ounce, limiting this week’s drop to 4.9 percent.
The Standard & Poor’s GSCI index of 24 commodities sank 6.5 percent yesterday on concern slower global growth may crimp demand and as investors sold so-called long positions, or bets on price gains. CME Group Ltd., Comex’s owner, has announced an 84 percent increase in silver margins since April 25.
“The higher cash-margin requirements simply cannot be met by all participants, and when a trader can’t make margin, the underlying security is often liquidated,” Lachlan Shaw, a commodity analyst at Commonwealth Bank of Australia, wrote in a note. “Further silver price falls are possible.”
The minimum amount of cash that must be deposited when borrowing from brokers to trade silver futures will rise to $21,600 per contract after May 9, CME Group said on May 4. That was up from $11,745 two weeks ago. Last week, the futures price jumped to a 31-year high of $49.845 an ounce.
The dollar rose 1.5 percent this week against six major currencies, set for its biggest weekly gain in four months. Asian stocks fell 1.7 percent, the biggest weekly drop since March, as rising jobless claims and lower consumer confidence in the U.S. signaled the economic recovery may be faltering.
Survey Outlook
Eight of 18 traders, investors and analysts surveyed by Bloomberg, or 44 percent, said that gold will fall next week. Seven predicted higher prices and three were neutral.
“A stronger dollar added to this weakness, although another increase in silver-margin requirements was the main impetus for the downward momentum,” Marc Ground, an analyst at Standard Bank Plc, wrote in a note. “The fall in silver prices has dragged the rest of the precious metals complex lower.”
There may be further declines in base metals as well as a short-term pullback in gold, and the potential drop for silver looked large, Ground said. Gold may slow its descent after central banks added the metal to their reserves, he said.
Mexico, Russia and Thailand added gold to their reserves in February and March, according to data from the International Monetary Fund this week. Central banks are raising their gold reserves for the first time in a generation amid dollar weakness.
Immediate-delivery palladium weakened 10 percent this week to $714.25 an ounce, while spot platinum shed 4.6 percent to $1,787 an ounce.
