Silver spot price rebounds on surprise drop in US Pending Home Sales

Singapore (Nov 25)  In today’s Asian session, the spot price of silver dropped to a 110-day low at $19.615, following the weekend’s accord between Iran and the group of world powers over Tehran’s nuclear programme. The deal has eased some geopolitical tension and driven the precious metal lower because of its appeal for investors in turbulent times.

Notably, silver reached an all-time peak late in April 2011 only to crash on the first trading session after the assassination of Osama bin Laden on 2 May that year, which marked the end of that particular major ‘’fear’’ trade.

Michael Widmer, an analyst at Bank of America Merrill Lynch, observes: “In general, you don't have a lot going for gold [and silver] at the moment, and the weakness we are seeing today, probably due to some drag from lower oil prices after the Iran deal, is just another short-term factor why you continue to see headwinds.”

Nevertheless, silver found support at the start of European trading today, which launched the metal on a gradual rebound as traders seemingly recognized the market’s overreaction.

At the US opening, the price of silver rose sharply above the psychological mark of $20, following the release of surprisingly insipid housing data from the United States. Pending Home Sales for October m/m declined by 0.6 percent, confounding the market consensus for a gain of 2.2 percent, following four consecutive months of falls.

The market quickly grasped that the big issue remains US monetary policy and the impact of economic data on the timing of QE tapering. Although the initial reaction of spot silver may reflect diminishing odds for a December taper, Deutsche Bank’s chief US economist Joseph LaVorgna observes that pending home sales have no material impact on estimates for Q4 GDP growth.

So far today, silver futures have oscillated within the range of $19.615 to $20.035, lacking clear direction. Right now, the precious metal is trading around 19.965, up 0.59 percent intraday.