Silver rises on weaker greenback
New York (Nov 6) Silver prices jumped on Wednesday, as increased buying by speculators amid a better global trend pushed up silver futures prices. More importantly, the greenback eased, creating more space for the precious metal's growth.
Silver contracts for December rose 0.61% to $21.775 an ounce on New York's Comex as of the time of writing. Gold added 0.61% to $1,316.20 an ounce.
Silver started to gain after the US dollar index, measuring the strength of the greenback versus a basket of six of its major peers, continued to decline from its recent highs. The index fell 0.25% to 80.60 points at the same time, the lowest since November 1. A weaker greenback makes dollar-priced commodities cheaper for holders of other currencies.
Analysts also said speculators indulged in creating fresh positions on expectations of a rise in silver demand during India's wedding season, which pushed silver prices higher in futures trading.
The wedding season in India begins in October, followed by the five-day Hindu festival of lights, Diwali - India's biggest and most important holiday of the year. In December, millions of people will be gathering with loved ones to exchange gifts as they observe Christmas. And finally, millions will celebrate Chinese New Year at the end of January 2014.
Crucial data ahead
Silver has lost nearly 28% while gold has lost 22% this year so far amid speculation the Fed will scale back its $85 billion in monthly bond purchases as the world's number one economy starts to pick up. As a result, the metal is poised to book first annual drop in twelve years.
Never-ending tapering speculations continued to busy global investors, as the US Federal Open Market Committee (FOMC) meeting scheduled for December 17-18 approaches.
The Bureau of Economic Analysis' first estimate of the third-quarter GDP growth rate is projected by most economists to show a 2% rise, down from 2.5% in the previous three months. The data will be released on Thursday. Adding to that, Friday will see the widely anticipated Labor Department's non-farm payrolls figure, which is expected to rise by 120,000 workers for the last month after a 148,000 gain in September.
Both readings are likely to be reflected in the Fed's decision. Stronger-than-expected readings may dramatically rekindle the likelihood of tapering, sending prices of precious metals lower. "“Given the recent string of better-than-expected US economic data, gold may test the $1,300 an ounce level ahead of the payrolls report,” James Steel, an analyst at HSBC Securities, wrote in a note. “The path of least resistance for gold appears lower.” These comments suggest that prices of silver will follow developments in gold.
