Silver price slips below $21 ahead of Putin statement on Crimea

Silver has been under intense pressure from short-sellers since the Crimean referendum on Sunday duly produced an overwhelming vote to join Russia and warmongers yesterday got nothing more than limited sanctions from the West. The precious metal touched a six-day low of $20.94 at the start of today’s European session.

Although silver yesterday opened with a four cent gap up at $21.464, the rally had fizzled out by the end of the day’s Asian session, as the markets downplayed the geopolitical risk in respect of Crimea. While both the EU and the US yesterday imposed economic sanctions against some senior Russian and Crimean officials, military intervention seems virtually off the table.

“If Russia continues to interfere in Ukraine, we stand ready to impose further sanctions,” stressed US president Barack Obama.
Predictably, Crimea’s parliament yesterday declared the region to be an independent state, with recognition following swiftly from Russian Federation president Vladimir Putin.

Moscow also responded to Western pressure for crisis mediation by an international ‘contact group’ by proposing a ‘support group’ of states to argue the case for recognition of the Crimean referendum and a new constitution for a rump Ukraine that would require it to uphold political and military neutrality.

Putin is today (at 11:00 UTC) scheduled to address the Russian Federation’s parliament on Crimea’s application to accede to the federation, in what appears to be an orchestrated process to achieve effective annexation of the region.
“At the end of the day, [Western] officials will accept Crimea is Russian controlled. They may not like it, and they may continue to protest, but the facts on the ground will be accepted”, writes Marc Chandler, head of currency strategy at Brown Brothers Harriman in New York. “Although many policy wonks talk about the break from the post-Cold War order, investors seem to be saying not much has really changed or will change.”

On the technical side, ANZ Bank’s Head of Global Markets Research Asia, Tim Riddell, yesterday opined that the “failure of silver to mirror gold’s uptrend (lack of confirmation) is another warning” that precious metals could surrender their recent gains.

In a note to clients published on Monday, Riddell projected that a slide below $21.15 “is likely to trigger a test of $20.20” (see right chart below). He emphasized that support at $20.20 “needs to hold to maintain the remnants of a more positive profile for silver rebounds developing later this year”.
Despite this background concern, Riddel warned the bears that the drop from February’s high appears to be corrective rather than a more aggressive slide.

Nevertheless, according to the ANZ strategist, the failure of recent bounces to gain any upside traction could be a sign that silver’s long-term downtrend could resume, despite an underlying bias that the metal had formed a base in 2013.

“Although silver appears to have based in mid-2013, recent rebounds have faltered in front of declining resistance (formed off the highs of 2011 and 2012)”, writes Riddell (see left chart above). “This may not be a strong resistance line, given that it only involves two peaks in silver prices, but it underscores the vulnerability of recent rebounds.”