Silver Update for Jan 25, 2012

Jan 25, 2012 11:30 PM EST – The price of silver closed at $33.092 today, up $1.61 per ounce for a gain of 3.6%. Electronic trading in New York added another $0.178 to close the session at $33.27 per ounce.

Visit PMBull’s 24 Hour Live Silver Price page for live silver price charts and today’s update.

There were two big drivers behind today’s price action. Apple earnings, which yesterday had stock futures trading up after hours, was first on deck. While Apple opened much higher, the broad indexes were mostly trading lower, with the exception of NASDAQ. Traders were apparently waiting for Bernanke to provide a green light with more QE talk. The FOMC announcement came, and everything ramped, including silver prices. The fact that nothing but Apple was up early on, and in fact a lot of stocks were selling off at the end of the day, should serve as a red flag.

Silver initially traded down roughly $0.40 this morning before the nearly 4% run higher on the Fed Announcement. Yesterday we had suggested a $0.30 – $0.35 dip in prices was just enough to form a mini-trough that traders might be able to buy. That was close enough.

It appears as if traders were simply looking for nothing to dissuade them from continuing the rally in the Fed statement and Ben was particularly dovish in his comments, or at least dovish enough to continue the “buy” programs that bots trading markets have been running.

Here is where we might provide a little caution for equity buyers tempted to join the party late. Apple gapped up above its upper trend line and failed to gain much after that, printing a red down candle by the end of the day. Could that have been a final exhaustion gap? Bull markets and rallies end on good news, after all. Google continues to sell off, having broking through its bearish rising wedge. Volume continues to remain light. Bearish divergences have been developing on several technical indicators throughout the rally. Shorts continue to be light, which is bearish.

The silver price is now up well north of 25% since its last bottom. Is that enough for the silver traders? We know the physical silver buyers are looking for those $60-100 silver predictions to develop over time and are not really concerned that silver might pull back hard when equities get the rug pulled out from under them. True silver stackers welcome the pull-backs, always hoping to acquire just a few more ounces before prices begin to reflect the true state of silver supply and demand.

If paying attention this morning, you will have noted that the premium in Sprott’s Physical Silver Trust (PSLV) got down to under 5%. It finished the day at 5.46%. If still buying funds, don’t let last week’s offering that took out the 30% premium scare you away. Now may be a better time than ever to buy PSLV over other paper silver investments. Check out how rarely the PSLV Premium has dipped below 6% since the trust’s inception. If Sprott’s Physical Silver Trust begins to add back premium, while silver prices are going up, this could be a way to gain more upside. If the premium increases while silver prices are falling, this fund may provide some downside protection. Granted, the premium could shrink from here, providing more muted gains, as it did in fact do today. [Silver Update Archive]