Silver price firms 0.7% on concerns over Europe

on Jun 11, 2014
Updated: Oct 21, 2019

**Silver Price**, Wednesday, June 11: Spot silver gained more than 0.7 percent yesterday and finished the trading day at $19.168 a troy ounce. It continued to edge higher today and was trading at $19.194 as of 06:34 BST. The precious metal has advanced 2.1 percent since Thursday. Year-to-date, the price is up 1.4 percent.
Last week’s investment demand for exchange-traded products backed by silver for was positive. “Silver ETF holdings were up 0.92moz to take the tally to 625.92moz. The ETFS (LSE) fund holdings were up 717koz, ETFS (NYSE) fund added 192koz and Mitsubishi fund holdings were up 183koz. On the contrary, investors liquidated 145koz from the iShares fund,” according to UBS AG. A release from Sentix on Monday, showed that German investor optimism for the eurozone fell to 8.5 in June from 12.8 in May, coming in much lower than the 13.3 estimate of economists surveyed by Bloomberg. “Worries about Europe are bringing in some safe-haven buying,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, told the news agency in a telephone interview.

Silver was boosted last week as the European Central Bank (ECB) revealed on Thursday it was going to impose negative interest rates on its overnight depositors, in what amounts to charging a fee, amid a host of other measures intended to infuse liquidity into the eurozone by encouraging lending and penalising banks for parking their cash. Investors, especially in Europe, were led to convert some of their holdings in the euro to precious metals to “gain a return they [could] no longer reap” from depositing their cash at banks, according to MetalMiner. Another reason the price was driven up, according to researchers at UBS, was attributed to short holdings in silver, or wagers on a decline, being at record highs which caused many of them to close out their positions after the ECB’s announcement, which increased buying pressure.

For the week ended June 3, “Silver net longs declined by 25moz to 33.76moz, the lowest level in about a year. Silver gross shorts dominated for a sixth consecutive week, increasing by another 12%, to an all-time high of 330.7moz. Silver gross shorts have risen by 92moz since late April; the increase in shorts has been too much, too fast and it is no surprise that a dovish ECB last Thursday quickly prompted many of them to seek cover,” UBS said in a note.

Because producers are relying more on hikes in investment demand for silver, what Mitchell Krebs, Chief Executive Officer of Coeur Mining Inc. calls “the big X factor,” to prop up its value, any upside gains are likely to be challenged by an appreciating USD, an improving US economy, and very strong global equities – which grew by $1.1 trillion in value last month.
A US Department of Labor report on Friday showed the US economy had regained all of the 8.7 million jobs lost during the recession. Figures for unemployment claims and monthly retail sales in the US – both of which might impact the price of silver – will be released at 13:30 BST tomorrow.

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