Silver prices today are beginning to jump, bolstered by safe-haven demand from unsettling news on the Ukrainian-Russian border.
After closing yesterday up $0.08 to $19.435 an ounce, the white metal touched as high as $19.90 an ounce in the early morning, a two-week high, before the U.S. Department of Commerce revised up U.S. annual gross domestic product growth to 4.2% from its previously reported 4% figure. As of the late afternoon, silver was trading close to $19.60.
Silver, as a precious metal investment, has a tendency to move on negative economic news or on tensions abroad, as it is seen as an alternative investment vehicle and a hedge against a weakening dollar. That's why silver got a bump in the early morning when officials from Kiev accused Russia of invading Ukraine, further escalating clashes between Ukrainian forces and pro-Russian militias.
It's also why, when the U.S. Commerce Department released positive news on economic growth in the United States this morning, it dove back to trading around $19.60 from its intra-day highs of around $19.90.
If silver does close out around its current prices, today's gains would be the most significant in three weeks, up $0.13 at 3:30 p.m. EDT. The last increase of this magnitude came on Aug. 6, when the white metal soared $0.265.
This day of gains is a welcome change from the continual losses silver has been experiencing since mid-July...
The silver price had been rallying for about six weeks in June before the summer doldrums kicked in and silver began a descent around mid-July. From its peak on July 11 of $21.445, silver has slid 9.4% as of yesterday's (Wednesday) close.
The culprit behind this steady decline, which has culminated in silver trading down from its 2013 closing price for the first time in two months, was renewed short activity in the futures market.
After short-side speculation hit an all-time high in the silver markets in early June, with short positions - paper contracts wherein the holder is entitled to profits if silver falls - reaching 49,000 contracts backed by about 245 million ounces of silver, speculators holding these short bets started to liquidate them and buy long. This was a key driver in silver's 11.7% gain in June.
But as soon as the shorts stopped liquidating their positions in late July, with contracts hitting a low not seen since February 2013, totaling about 12,600, the short-side speculators reentered the market and helped plunge silver into a six-week bear session.
As data from the U.S. Commodity Futures Trading Commission (CFTC) suggests, silver is currently in a period of short-building. Every week since hitting its low on July 29, short contracts have steadily built to 27,646. Tomorrow (Friday), the CFTC will release the latest numbers as of Tuesday, and reveal whether short interest is mounting, or if the shorts are beginning to liquidate.
If the short positions begin to fall, it's expected that silver prices will begin to climb, as it will mean more traders are beginning to buy long.
Outside of potential gains from short covering, silver is likely getting today's boost from the unrest in Ukraine, which began yesterday as Kiev officials announced that Russian forces were clandestinely entering Ukraine and supporting pro-Russian rebels.
Silver gained $0.01 on Tuesday and another $0.08 on Wednesday, and, while modest increases, it marked the first time since July 22 that silver strung together two consecutive days of gains. And if it continues to trade at its current levels by the time of market close, it will be the first time since July 11 the white meal had three consecutive days of trading up.
NOW: Numerous factors are building that make today's silver prices look downright cheap. Here's how you can invest in silver today for double-digit gains...