Silver Spot Price: Shedding Yesterday’s Gains

NEW YORK (Sept 20)  Silver is well down today after yesterday’s rally, seemingly on post-Fed decision profit-taking.

Silver prices have tumbled during European afternoon trading, with silver for immediate delivery down 1.83 percent at $22.65 an ounce and December futures down 2.67 percent at $22.67 an ounce as of 14.51 BST. Spot silver was locked into a range of between $22.45 and $23.16 as of 15.04 BST. Demand for silver exchange-traded funds has been strong so far during the year and remains so. The world’s biggest ETF yesterday reported inflows of nearly 105 tonnes, the biggest one-day rise in its holdings since late July.

Silver prices rallied for two consecutive days through Wednesday and yesterday after Ben Bernanke’s announcement that the Federal Reserve would not start tapering its $85 billion a month commodities-friendly bond-buying scheme, known as quantitative easing. Bernanke again stressed that the stimulus programme was "not on a pre-set course."

"The market will take some time to digest the 'no-taper' surprise," said Victor Thianpiriya, an ANZ Bank analyst in Singapore, as quoted by Reuters.

Analysts had broadly expected that the FOMC would decide during its two-day meeting on Tuesday and Wednesday to start scaling back its monetary stimulus programme by between $5 and $10 billion.

The next scheduled FOMC meeting is on October 29- 30, when an announcement of chairman Ben Bernanke’s successor is expected to be made. Incumbent vice-chair Janet Yellen, who is seen as a supporter of the stimulus plan, is the leading candidate for the job.

In a client note, OCBC Bank observed: "The prospect of any tapering this October remains data-dependent, and speculative interest may remain soft as investors continue to play a wait-and-see game for incoming U.S.-centric economic data." And Reuters quoted Societe Generale analyst Robin Bhar as saying that "tapering may not have been announced on Wednesday, but it is coming".

By 2:30pm (NY time), spot silver had lost more than 5%,dropping to $21.84/oz.