Silver hits three month low on global concerns
Mumbai-India (Nov 23) Silver hit a three-month low on Saturday in Mumbai’s popular spot bullion market, Zaveri Bazaar, following global trend, driven largely by the renewed talks of the US Federal Reserves to taper its $85 billion monthly bond and mortgage backed purchases. Gold also followed the move but the decline was arrested in India on festive buying.
The price of silver fell 0.73% or Rs 340 on Saturday to close at Rs 45,940 a kg, the level not seen since August 12. In the benchmark London market, however, silver was traded at $19.87 an oz on Friday, the lowest level since August 7.
Silver has witnessed a sharp 6.18% decline in the last seven weeks in London translating thereby 7.95% fall in the local bullion markets considering 0.64% depreciation in the rupee at 62.87 against the dollar.
“Silver price decline is driven by expectations that the Fed would taper its $85bn monthly bond and mortgage backed securities purchases in light of strengthening economic activity; similar to factors influencing the gold market,” said a recent report by the Thomson Reuters GFMS.
The fundamental balance, the difference between supply (mine production and scrap) and demand (fabrication excluding coins) of silver is set to extend its residual surplus for the eighth successive year.
Silver prices in the first ten months of the year have averaged $24.51, a 20.7% decline year-on-year. GFMS forecast a full year average price of $24.24 in 2013.
The trend is similar for gold also. After hitting four-and-a-half month low at $1,243.08 an oz on Thursday and moving in a very narrow range, gold in spot London market remained traded at $1,243.63 an oz on Friday. Gold has seen this level earlier on July 8 with its price quoted at $1,237.07 an oz.
Bears are expected to continue dominating silver market which may pull gold prices too at least in the short term primarily because of concerns of US Fed tapering. Despite indications of a recovery in the US economy supported well by US Fed chairman Ben Bernanke for continuing bond purchase for now, apprehensions are that the announcement of the monetary easing will be announced in the next Fed meeting. This is weighing on bullion prices,” said Sugandha Sachdeva, Incharge (metals, energy & currency) Research, Religare Securities Ltd.
Religare forecast gold price to see the first support level at $1,200 an oz. On breaking this, however, the yellow metal may fall to $1180 an oz. In the rupee term, however, the fall in gold price may be capped due to the shortage of availability from official sources because of stringent import norms imposed by the Reserve Bank of India (RBI).
Similarly, silver prices are set to fall $19 an oz and then $17.5 an oz translating, thereby, in the rupee term at Rs 42,000 a kg, over 42% fall from the peak of Rs 73,000 a kg in 2011.
Samson Pasam, Senior Technical Analyst of Angel Broking, forecast gold price to see the strong support at $1200 an oz in dollar term and Rs 29200 per 10 grams for near month delivery on the Multi Commodity Exchange.
India is the world's largest consumer of silver and gold.