Silver Market Update – Week Ending January 25th 2013

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Seeking Alpha Reports Silver ETF Holdings Rise to 8% of the Annual Silver Supply, Spanish and Italian Yields Climb on Record High Spanish Unemployment, Silver Technical Levels Cap Silver, then Cause it To Retreat, Deutsche Bank Looks for Precious Metals to Be Range Bound.

Silver Market Update - Week Ending January 25th 2013Silver ran both up and then finally down in the week that finished Friday, January 25th. The white metal gapped open to $32.02 in spot markets and rallied all the way to a five week high of $32.38 by the middle of the week. From that price point on it saw technical selling and profit taking emerge to take it back down to close out the week at $31.19, down two and a half percent from where it had opened spot markets on Monday.

Fundamental news continued to support the metal as ETF holdings grew, Spanish and Italian bond yields rose again, and German Chancellor Merkel accused Japan of starting a currency war. Silver technical levels and a mixed comment from Deutsche Bank worked against silver by the close of spot markets on Friday,January 25th.

Seeking Alpha Reports Silver ETF Holdings Rise to 8% of the Annual Silver Supply

Seeking Alpha reported this past week that silver inventories were again on the march higher. They informed the markets that silver held by all of the ETF’s, or exchange traded funds, rose by 59.4 million ounces during the past twelve months. This brought ETF silver holdings to around eight percent of the total yearly silver production.

Spanish and Italian Yields Climb on Record High Spanish Unemployment

Meanwhile, you saw more bad news out of the troubled periphery of Euroland. Spain’s unemployment rate jumped to 26% during the fourth quarter of 2012. This represented an all time high in modern Spanish history. The upsetting job market news caused both Spanish and Italian bond yields to spike again. While bad for the poor people of Spain, the threat of more trouble in the Eurozone is always good for the safe haven bid side of silver.

Merkel’s Accuses Japan of Currency War and Supports Silver Safe Haven Demand

One story that did not receive enough media coverage this past week had to do with remarks from Chancellor Angela Merkel. She suggested that Japan is now manipulating its currency. This is not the first mention of the unsettling prospect of currency wars in the past few weeks.

Other nations such as Switzerland are attempting to lower the value of their currencies so that their own exports become more competitive around the world. The notion of a new currency war that sees the major central banks of the globe attempt to race each other to the bottom is significantly bullish for silver and gold.

If such currency wars break out in full force, you could expect to see a great deal of safe haven demand for the precious metals, since they can not be manipulated by jealous central banks.

Silver Technical Levels Cap Silver, then Cause it To Retreat

Though March silver prices reached a five week high on Wednesday the 23rd, they began to struggle against profit taking in silver by Thursday. A technical correction commenced when silver failed to take out the major resistance at $32.50 after peaking in spot markets at $32.38. Silver then lost its hold on the fifty day moving average of $32.02 and finally broke down past the ten day moving average of $31.55. It did manage to stay atop the next support at $31 per ounce.

Deutsche Bank Looks for Precious Metals to Be Range Bound

One last bit of fundamental news that hurt the precious metals complex a little came from Deutsche Bank. The German investment bank said that it now expects these metals to be range bound for the rest of the first quarter.

The silver lining of their prognosis came with their average target for silver for the quarter. They still look for silver to average at $33 per ounce, which would have the white metal at still significantly higher levels than it holds now for the rest of the quarter.

Take Away On Silver Market Prices

Silver suffered from a roller coaster ride this week. It first gapped up and rose in the beginning of the week on continued bullish fundamental news. When silver could not punch through that important resistance at $32.50, it began to succumb to selling pressure again.

The important take away is that silver at its Friday spot market close of $31.19 does not represent a breakdown in price levels. It is merely more of what Deutsche Bank called range bound trading. The white metal should still manage to rise before long, though it may take it a few attempts to break out of to the topside.

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