Silver spot price bounces off lows, despite upbeat stance from FOMC’s Dudley

New York (Nov 19)   Federal Reserve Bank president of New York William Dudley said yesterday in an address that he was "getting more hopeful" on the prospects for the US economic recovery. Dudley is an influential FOMC voting member, seen by the markets as a devoted supporter of easy-money policies.

Dudley’s upbeat comments sparked a sharp dive of the spot price of silver, to a 100-day low at 20.203, reached in yesterday’s North American trading session. Today though, silver has reversed the drop, with the market seemingly recognizing an overreaction by precious metal short-sellers, given that the US Dollar Index failed to rise above its intraweek high set in yesterday’s Asian trading.

According to analysts at Credit Agricole, the overall stance of the US Fed remains as expressed by putative chair Janet Yellen’s praise of quantitative easing last week, remarks which may well have kept the greenback under pressure from the bears.

Still to come today, FOMC member Charles Evans is scheduled to speak at 19.15 UTC.

The markets will also be tuning in to Fed chairman Ben Bernanke’s address scheduled for just after midnight UTC tonight at the National Economists Club in Washington DC and entitled “Communications and Monetary Policy”. Bernanke is likely to discuss possible options for a strengthening of the Fed’s forward guidance.

As a for instance, analysts at Goldman Sachs expect the Fed to lower its unemployment rate threshold in March alongside an announcement of QE tapering, in an attempt to counter the potential negative effects from the reduction of asset purchases.

Analysts at the Bank of Montreal a possible explanation for the weakness of precious metal prices, despite the prolonged US bond-buying, as being what they call ‘de facto, light taper’. “At a constant monthly pace of asset purchases, the size of QE as a proportion of the Fed’s total assets is gradually declining”. Thus, the US central bank is expanding its balance sheet but at a slower pace.

Right now, silver is trading around 20.417, up 0.12 percent intraday.