Metals and Mining
Are Silver Prices Ready to Break Out?
Gold for April delivery settled $4.70 to $1,365.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has stayed confined to its tight range trading as high as $1,367.50 and as low as $1,354.40. The spot gold price was popping more than $5, according to Kitco's gold index.
Gold prices were seeing mild safe haven buying as political unrest exploded in Bahrain on the back of a resolution in Egypt.
Scott Redler, chief strategic officer for T3Live.com, says that a close above $1,368 would provide a long entry point. Gold closed just shy of that level Monday.
Silver prices added 53 cents to $30.53, which makes four closes above $30 in the past week. The big story on silver Monday was that future contracts were in backwardation, a situation in which prices in front months were higher than those further out.
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Silver's March contract closed at $30.53 while December's contract settled at $30.39. According to experts, backwardation rarely occurs in the metals market and points to a physical supply crunch in the short term.
"Right now we are near a breakout. It could take place," says David Morgan, founder of Silver-Investor.com. "Silver is as tight as I have ever seen it, physically ... As long as the holders of physical silver are unwilling to part with it at $30 ... any new buying is going to take the price higher."
If silver does break out past the $31.50 to $32 level, the metal could leave gold in the dust. Due to its volatility, silver can outpace gold to the upside and downside. Gold rallied 26% in 2010, while silver popped 80%. While gold must contend with a triple top, silver doesn't have that technical headwind. Price estimates for silver range from $35 to $45 for the year.
"You could see silver really take off and gold not do a whole lot," says Morgan.
The U.S. dollar index was adding 0.24% to $78.63, which was holding gold prices down a bit, while the euro slid 0.54% to $1.34 against the dollar.
This week will hopefully provide direction for gold, which has been undergoing an identity crisis this year. It's not being purchased as much as a safe-haven asset, with today's buying modest compared to double digit rallies, and it is not attracting big buyers as an inflation hedge.
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