Silver rises on weaker greenback
New York (Nov 6) Silver prices jumped on Wednesday, as increased buying by speculators amid a better global trend pushed up silver futures prices. More importantly, the greenback eased, creating more space for the precious metal's growth.
Silver contracts for December rose 0.61% to $21.775 an ounce on New York's Comex as of the time of writing. Gold added 0.61% to $1,316.20 an ounce.
Silver started to gain after the US dollar index, measuring the strength of the greenback versus a basket of six of its major peers, continued to decline from its recent highs. The index fell 0.25% to 80.60 points at the same time, the lowest since November 1. A weaker greenback makes dollar-priced commodities cheaper for holders of other currencies.
Silver has lost nearly 28% while gold has lost 22% this year so far amid speculation the Fed will scale back its $85 billion in monthly bond purchases as the world's number one economy starts to pick up. As a result, the metal is poised to book first annual drop in twelve years.
Never-ending tapering speculations continued to busy global investors, as the US Federal Open Market Committee (FOMC) meeting scheduled for December 17-18 approaches.
The Bureau of Economic Analysis' first estimate of the third-quarter GDP growth rate is projected by most economists to show a 2% rise, down from 2.5% in the previous three months. The data will be released on Thursday. Adding to that, Friday will see the widely anticipated Labor Department's non-farm payrolls figure, which is expected to rise by 120,000 workers for the last month after a 148,000 gain in September.
Both readings are likely to be reflected in the Fed's decision. Stronger-than-expected readings may dramatically rekindle the likelihood of tapering, sending prices of precious metals lower. "“Given the recent string of better-than-expected US economic data, gold may test the $1,300 an ounce level ahead of the payrolls report,” James Steel, an analyst at HSBC Securities, wrote in a note. “The path of least resistance for gold appears lower.” These comments suggest that prices of silver will follow developments in gold.