Does Silver’s Recent Performance Relative to Oil Mean to Silver Investors

Does Silver’s Recent Performance Relative to Oil Mean to Silver Investors : Gold market witnessed a bumpy roller coaster ride during the week. An interesting thing to observe was the reasons that economic commentators gave for price fluctuations. On Tuesday gold for June delivery lost $14.50 to settle at $1,453.60 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,468.50 and as low as $1,445 while the spot gold price was shedding more than $11. The reasons for the decline were explained by falling oil prices and by a Goldman Sachs report with a short-term bearish call on oil and copper, the industrial bellwethers. (The term “bellwether” refers to the practice of placing a bell around the neck of a castrated ram leading his flock of sheep so that the movements of the flock could be noted by hearing the bell).

Precious metals were particularly hard hit by the Goldman-induced selling even though they were not – platinum aside – directly mentioned in the note. Silver had hit a 31-year high of $41.93 an ounce but fell back at one point to $39.75, a 5.2 per cent reversal. The explanation for this in Bloomberg is that an investor took an outsized option bet that SLV will drop 37% by July. Bloomberg reports: "A trader’s almost $1 million bet that an exchange-traded fund tracking silver will plunge 37 percent by July was today’s biggest single options trade on U.S. exchanges as futures on the metal reached a 31-year high. The 100,000 options to buy 100 shares each of the iShares Silver Trust (SLV) at $25 by July changed hands at the ask price of about 10 cents and exceeded the open interest of 6,054 outstanding contracts before today, indicating that a buyer of a new bearish position initiated the transaction. The ETF rose to the highest intraday level since trading began five years ago, $40.33, before erasing gains. It fell 0.5 percent to $39.67 at 12:54 p.m. It hasn’t closed below $25 since November."

On Wednesday, gold rose recovering after its biggest one-day drop in nearly a month. The explanation for the upward move was that the dollar retreated amid expectations the US Federal Reserve will maintain its accommodative monetary policy for now. Also, the market reacted to the positive industry report issued by metals consultancy GFMS group saying that gold’s decade-long price rally could take the metal above $1,600 an ounce by year-end, as investors’ appetite for gold sharpens further (notice the food metaphor.) The company sees gold prices averaging $1,455 an ounce this year and sticking to a range of $1,319-1,620 an ounce. In its Gold Survey 2011, metals consultancy GFMS said there was growing evidence that buyers may drive prices still higher this year. "There is a higher starting point for each successive investor-led rally in the price. Thus, assuming investment demand will at some point take off again this year, there remains good scope for new highs in the price to be recorded," the consulting group said.



Thursday morning when gold futures began climbing some analysts attributed it to weakness in the U.S. dollar, the euro and sovereign debt issues in Europe.

When on Friday Gold jumped to another record high to $1,479.70 an ounce on Globex, after settling at $1,472.40 on the Comex division of the New York Mercantile Exchange analysts said it was inflation fears in China that are pushing gold and silver prices higher. China's inflation jumped to a 32-month high. Another reason given for gold's performance was a softer U.S. dollar. We will have more to say on the latter relationship in the following part of this update.

We don’t know if next week investors will get their risk appetite back. While markets are not focusing on geopolitical risk in Africa and the Middle East and the Japanese natural and nuclear disasters, these problems remain and will lead to continuing safe haven demand. Source ews.silverseek.com... For the latest updates PRESS CTR + D or visit Stock Market news Today

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