HSBC Comments Support Silver, Fed Remarks Show QE3 Will Continue and Backstop Silver for Some Time, COMEX Cutting Margin Requirements on Silver Again, Italian and Spanish Bond Yields Rise and Remind of Safe Haven Bid for Silver.
Silver seesawed up and down in a narrower range than usual this week that ended Friday, February 8th. The white metal opened Monday spot markets at $31.62, reached as high as $32.03 during the week, then finally finished off Friday spot markets down less than a percent at $31.42.
Silver continued to attempt but fail to break above the $32.50 resistance, yet it remained comfortably above the $30 major support. The precious metal found support this week as HSBC commented positively on conditions for silver, a Federal Reserve President indicated that QE3 will continue for some time, COMEX announced it will cut silver margins again, and Italian and Spanish yields continued to rise.
HSBC Comments Support Silver
HSBC is the world’s largest international bank by balance sheet size. This past week, their precious metals team made comments on the metals. They claimed that accommodative worldwide monetary policy will continue to support the precious metals.
The bank’s report stated that they believe the US Federal Reserve will continue its quantitative easing until the conclusion of 2013 and maybe into 2014. They concluded with the idea that investors will look for high quality real assets such as bullion. This was a ringing endorsement for silver and gold, but the Fed itself was about to weigh in on the subject of the QE3.
Fed Remarks Show QE3 Will Continue and Backstop Silver for Some Time
Silver found a still better backstop during a week when it was consolidating. Charles Evans, the Chicago Fed President, made remarks that QE3 would go on for some time to come. He called their program to print money and buy bonds an energy bar that feeds the economy.
Evans said that this program will last until the Fed is fully confident that the labor market has significantly improved. As many analysts these days believe that unemployment will remain elevated even into 2015, it looks like the money printing program will be here to rally silver for some time yet.
COMEX Cutting Margin Requirements on Silver Again
Back in January, the CME cut its silver margin requirements, and the white metal rallied in response. This past week, they announced that they will again cut metals margins on both the COMEX and the NYMEX.
They are reducing the silver margin by over 13 % from $12,100 to $10,450 and the maintenance margin similarly by 13 % percent from $11,000 to $9,500 per contract. This means that it will now be over 13 % percent cheaper for speculators to acquire and hold the main 5,000 ounce COMEX silver contracts on the futures markets. You can look for a boost to silver prices this week when the changes take effect.
Italian and Spanish Bond Yields Rise and Remind of Safe Haven Bid for Silver
In case you have forgotten about the European Union sovereign debt crisis, this week reminded you that it has not gone away really. Even though there had not been any major news for several months, political and economic turmoil has erupted in Spain and Italy again. Industrial output in Italy dropped for all 2012 to the lowest reading in a number of years.
Spain is embroiled in a donation scandal that threatens to bring down the ruling party. Both Spanish and Italian yields on their bonds are rising to near dangerous levels and are over 5% again. This in itself is bullish for silver and gold. If the crisis becomes front page news again, this will prove a significant driver for the precious metals.
Take Away On Silver Market Prices
Silver has managed to stay in the upper half of its $30 to $32.50 range for a number of weeks now. The fundamental news remains bullish, even when the white metal consolidates a bit. CME cutting the margins on silver trading is a big plus that should continue to carry it this next week at least.
As you have seen for some time now, quantitative easing is a trend that is not about to go away any time soon. For now, silver remains capped under the $32.50 resistance, but this could change at any time.