Silver spot price eases as Emerging Markets panic subsides

Frankfurt (Jan 28)  The spot price of silver has today been under pressure from short sellers, following an announcement by the Central Bank of the Republic of Turkey (CBT) that tomorrow it will hold an emergency meeting in order to stop a free-fall of the Turkish lira. The news eased jitters in emerging markets, with some analysts believing that the CBT will start a decisive rate-tightening cycle which could encourage other developing countries to also act assertively and avert a potential EM currency crisis.

Precious metals retained their safe-haven lustre last week though, while the panic in emerging markets currencies escalated. The Argentine peso tumbled 17.45 percent against the greenback and the Turkish lira depreciated against the US dollar by a more modest 4.62 percent. But emerging market currencies have stabilised against the dollar since the CBT announcement, with attendant negative impact on the spot price of silver.

Meanwhile, the Markit Flash US Services PMI for January has checked in today at 56.6, comfortably topping the market consensus for improvement to 56.2 from December’s 55.7 (revised up from 56.0). Although the employment component eased to 54.1 from the prior month’s 55.2, Markit chief economist Chris Williamson said the preliminary US PMIs “suggest that job creation continues to run at a rate of around 200,000 per month, meaning the non-farm payroll numbers should recover from December’s dip”.

According to Williamson, “the flash manufacturing and services PMI surveys collectively suggest that the economy grew in the final quarter of last year at a rate of around 3.5 percent, and that the pace will have accelerated at the start of [this] year”.

Markit’s chief economist concludes that the robust data supports the view “that the FOMC should be comfortable in sanctioning a further tapering of the Fed’s asset purchase programme at its January meeting [this week]”.

Right now, silver is trading at around $19.877, down 0.8 percent intraday.