Silver Prices Plummet 4% Today on Taper Worries

December 12, 2013

New York (Dec 12)  Fed and taper. Same story, different day. Everyone’s tired of hearing about, but that is what’s influencing the precious metal market today. Silver prices saw a recent spike that appears to be tied to shorts covering large positions they had taken in recent weeks and months. 

Silver is getting hammered this morning. The metal is down more than 4% right now at $19.53/oz. All of Wall Street is getting nervous as we get closer to the Fed’s December meeting next week. Recent jobs data and a potential budget deal are strengthening the Fed’s case to begin a taper.

A month ago, analysts were saying it would be early next year before a taper would happen. November’s jobs data hit and a lot of people started singing a different tune. The ball is in the Fed’s court to decide if they want to taper or not. Jobs data is in their favor right now. A possible budget deal is also helping take away some uncertainty. The deal still has to pass the House and Senate. The Senate shouldn’t be a problem. The same can’t be said for the House. We’ll see how the House vote shakes out today.

I think the Fed starts tapering next week. Jobs data is supporting it, and Fed officials know they can’t QE forever. Taper has to start sometimes, may as well be a small one now.

What does this mean for silver? Silver and gold investors have been fretting over a QE taper since August. Prices in both metals have fallen a good bit since then. It appeared that the taper may had been priced in when the metals rallied earlier this week, but it looks like investors are still nervous about QE tapering.

QE tapering will cause the dollar to increase and that will put downward pressure on precious metals.

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