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Silver Price: Push and Pull
Mon, Apr 27, 2009
By Melissa Pistilli-Exclusive to Silver Investing News
The latest events affecting short-term silver spot price
fluctuations have come out of China and Mexico. Silver was trading
higher Monday morning on news that China has been actively increasing its gold reserves and that the swine flu
outbreak in Mexico has spread further North into the U.S., Canada and
possibly Europe. After closing at $12.89 in New York on Friday, the
silver price opened as high as $13.10 on Monday before falling to
$12.90 at closing on profit-taking.
On Friday, China finally admitted to what many have speculated for
some time. The Asian nation has been secretly building its gold
reserves by 76 per cent since 2003 to 1,054 tonnes. “Investors expect
China will buy more,” said Dick Poon,
manager of the precious metals trading desk at Heraeus Ltd. ”The
markets are still feeling very positive about this news.” The news is
influencing the price of both precious metals as silver often moves in
tandem with the gold price.
New reports of swine flu cases spreading beyond Mexico have led to
fears that a pandemic may be in the works. This fear is having a
psychological impact on the markets, the precious metals included. It
could also have a real impact on supply as Mexican silver exports may
be affected. Of course, these events only influence the silver market
in the short-term. The long-term picture reveals that silver prices
have been rebounding for quite some time now and will continue to rise
as the global economic crisis unfolds. Some market analysts are not
dissuaded by the latest sense of euphoria over perceived improvements
in the financial system and are still convinced that the worst has yet
That “worst” is hyper-inflation, which many see as the natural
result of large amounts of printed money being pumped into the system
by governments around the world under the banner of “quantitative
easing.” Those looking for protection from such a disaster will no
doubt turn to safe-haven assets like gold and silver.
For now, expect some push and pull in the silver price as the market
remains volatile. There are “those who see inflation, due to the
massive infusion of liquidity into the financial system, versus those
who expect a deflationary environment going forward,” said John Gross, President of J-E Gross & Co., a metals-industry consulting firm.
Silver Mining Stocks
In a recent interview with The Gold Report, SilverStrategies.com editor Sean Rakhimov gave some of his picks for promising silver mining stocks, including Pan American Silver Corp. [NASDAQ: PAAS] [TSX: PAA], Silver Wheaton Corp. [NYSE: SLW] [TSX: SLW], and Fortuna Silver Mines, Inc. [TSX.V: FVI].
Rakhimov says he likes Pan American, which has brought two mines
into production in the past month and expects an output of 21.5 million
ounces for 2009. “Now they should be profitable at that, but if silver
goes even halfway up to where I think it’s going, that’s going to be
one blue chip company,” he added.
Silver Wheaton will soon benefit from their investment in Goldcorp’s
Peñasquito mine, which is being brought into production and expected to
bring in 10 million ounces.
Rakhimov also likes Fortuna Silver. Even more interesting than their
mine in Peru, he says is their gold-silver asset in Oaxaca, Mexico,
which is expected to begin producing in 2010. “This year Fortuna plans
to produce 1.6 million ounces of silver in Peru at a cost of about
$2.00, said Rakhimov. “Provided things work out the way they plan,
they’re going to do well there and the project in Mexico, once it’s in
production, should significantly change the bottom line.”
On Monday, Fortuna reported its 2009 first quarter production
figures at 384,339 ounces, which was a 32 per cent increase over the
previous quarter and a 174 per cent increase over this same period last
year.”Fortuna is moving steadily towards delivering 1.6 million ounces
of pure silver for 2009, which should account for approximately 50 per
cent of revenue, along with significant by-product lead, zinc and
copper,” commented Fortuna President, CEO and Director Jorge Ganoza.
“Management at Caylloma is focusing on the development of the high
grade silver structures while maintaining an optimal production blend.
The start-up of the copper circuit and the plant expansion will
strengthen the company’s financial performance in the coming year.”
On Monday, shares of Pan American Silver on the TSX were trading at $21.13, down from a 52-week high of $37.15.
Shares of Silver Wheaton on the NYSE were trading at $8.11, down from a 52-week high of $15.94.
Shares of Fortuna Silver on the TSX.V were trading at .83 cents, down from a 52-week high of $1.13.