Page 13 - Bullion World Volume 4 Issue 5 May 2024
P. 13

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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