Page 13 - Bullion World Volume 4 Issue 5 May 2024

Bullion World | Volume 4 | Issue 5 | May 2024

extremis - is also price-inelastic and the price-sensitive Breaking down the volume patterns, the highest spot
element of silver mine production drops to roughly 25% turnover came in the third week of the month, as a
of total silver supply. battle royal developed between bulls and bears, keeping
prices in a very narrow range of just 70 cents centred
Also the primary silver mines’ cost curve means that on $25, until a push towards $26 followed by an equally
at prices above $22, as they were for all of March, no aggressive retreat. As prices slipped thereafter volumes
primary silver mine is under threat. Metals Focus’ dwindled, with participants standing back and looking for
analysis puts global average cash costs at just under direction.
$5/ounce with all-in sustaining costs between $14 and
$15. These figures come from last year and inflationary The $25 level was also the arena for the swap/forward
forces will have boosted those numbers this year, but by market with a big boost in volumes suggesting that this
nowhere near enough to put production under threat. was a key target on both sides of the market and the LLD
figure underpins this.
Meanwhile in the first week of March silver did move
with gold, but not with it relatively reluctantly. By this we As far as options are concerned there was here, too a
mean that when gold is moving with conviction – either big outlier with 19M ounces in one day against a Jan/
up or down – then silver will take the same direction Feb average of 6.0M ounces, although it is fair to say
but will move by at least twice as much as gold. It took that silver options volumes are highly variable. On this
until April for silver to catch up with and then overtake occasion the big outlier was the 13th, the day when
gold; in March gold rallied by 8.7% and silver, by just silver rallied from $24 to $25, suggesting some sizeable
11.2%. This most likely reflected two elements; firstly call activity.
a lack of belief that gold’s rally would persist as there
didn’t seem (erroneously, as we can see above) to be Exchange Traded Products saw increased buying
any visible triggers for gold’s move; and secondly the fact although it remained sporadic; of 21 trading days only
that economic uncertainties were at that point keeping nine saw net creations, while the cumulative activity over
copper firmly on the back foot. the month saw a net increase of 24t as most of those
nine creating days saw heavy volume going through. On
As far as trading patterns are concerned, silver options COMEX there was a massive 78% increase in outright
were also lively, in fact posting a 22.5% gain on average longs, up from 5,352t to 9,302t by 2nd April. There was
over the 2023 daily average, compared with gold’s 20% some sizeable short covering in the face of the rising
uplift. LoanLeaseDeposit volumes were also up by a price, coming down by 2,060t or 34.3%. Whereas
thumping 46%, suggesting that some base metal (and at end- February silver looked vulnerable to a short-
possibly primary miners also) were locking in some covering rally, by early April the heavy outright long
by-product credits. We should look at this with caution, position was looking menacing.
though, as there was one massive outlier on 14th,
with 35.9M ounces going through against an average
over Jan/Feb of 14.6M ounces, suggesting a hedge
programme / financing exercise underway.

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