Silver Market Update – Week Ending September 28th, 2012

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Silver Best Performing Commodity of the Third Quarter, Hedge Funds Turn Super Bullish on Silver After QE3 Announcement, China Silver Imports Make One Year High, Weak US Data Supports Precious Metals, Spanish and Greek Protests Scare Markets Again.

Spanish and Greek Protests Scare Markets AgainSilver marked a second week where it consolidated its recent gains the week that ended September 28th. It closed mere pennies below where it had finished the week that concluded September 21st, at $34.49 versus $34.53 previously in spot markets.

Silver bull traders remain in firm command of the white metal in this ninth week of daily chart uptrend. This past week saw more poor U.S. Data and scary European strikes that rocked the industrial metal bid for silver. Despite this, hedge funds turned bullish on the precious metal against the backdrop of news that silver proved to be the best performing commodity of the quarter.

Silver Best Performing Commodity of the Third Quarter

Though gold had a solid third quarter and posted gains of 13 percent, silver outperformed with sterling gains of 23%. This impressive double digits return makes silver the commodity with the best performance of the third quarter.

This is the case despite the fact that silver is around 31% below its record that it set at $49.79 back in April 2011. The average price for silver for the year so far is $30.67, which makes it the second highest average for silver ever.

Hedge Funds Turn Super Bullish on Silver After QE3 Announcement

Against the backdrop of the prior week’s Federal Reserve QE3 to infinity announcement, hedge funds have grown increasingly bullish on silver. This week, they marked their most bullish level in seven months.

In the third quarter alone, silver exchange traded products have grown silver holdings by over 717 metric tons worth more than $790 million. Hedge funds held 30,986 futures and options on futures for silver as of the week that finished September 18th, the most long positions since February 28th, it was announced this past week.

Analysts who cover silver concur with hedge fund managers. Fourteen silver analysts average expectation is that silver prices will go up the next three quarters at least. They also expect prices to average more than 11 percent higher than now at $38 an ounce average in the quarter that ends June of 2013. Morgan Stanley projects that silver will outperform gold in the next few quarters as well.

China Silver Imports Make One Year High

It is not only hedge funds, analysts, and major investors who raised their stakes on silver this quarter. China marked a one year high level in its silver imports in August, per data announced this week. As China is the second biggest silver importer, behind the U.S., this is a major positive development for the white metal.

Weak US Data Supports Precious Metals

Silver and gold also found support this week from weaker than anticipated U.S. economic data. Thursday saw the release of U.S. durable goods that shocked with a precipitous decline of 13% for the month of August. That same day, the government admitted that second quarter U.S. GDP growth slipped by .4% down to a mere 1.3%. This caused the U.S. dollar index to sink and silver and gold prices to rise inversely.

Spanish and Greek Protests Scare Markets Again

Perhaps the scariest news item for the markets this week boiled down to live news videos of violent protests in the streets of both Greece and Spain. Protestors grew angry because of ongoing government austerity programs. Besides this, several European Union government officials offered comments that unnerved markets about the debt crisis.

The European stock markets and Euro currency both plummeted on the news. This proved to be negative for silver and other commodities this week. Markets and metals prices rebounded some when the Spanish government released its budget later Thursday, and it was as expected mostly. Italian and Spanish bond yields began to rise again despite this.

Take Away On Silver Market Prices

Most of the news for silver turned out to be bullish this week. Between the announcements that silver performed best of all the commodities this quarter, China increased its silver holdings to a year record, hedge funds turned super bullish on the white metal, and U.S. economic data proved to be weaker than expected, you might have expected prices to rise.

Markets remain generally risk negative because of the European sovereign debt crisis that goes on unresolved, and this managed to keep a lid on precious metals prices this week that ended the third quarter September 28th. Technical support for silver lies back at $33.36, $33, and $32.51, while resistance is at this past month’s high of $35.26.

Silver will likely continue to consolidate in this range until the next catalyst to propel it higher emerges. With the nine week long uptrend on the charts intact, this propellant could be right around the corner.

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