Our silver price news today looks ahead at another volatile week for the white metal as global precious metal sentiment remains guarded.
In early-morning trading Monday, spot silver was trading down 1.5% at $21.88.
Silver traders are closely watching the Wednesday outcome of the Federal Open Market Committee's (FOMC) two-day meeting to see if the U.S. Federal Reserve finally follows through on plans to start weaning the U.S. economy off five years of quantitative easing (QE).
The growing consensus is the Fed will implement a token trim. Expected from Fed Chief Ben Bernanke is the announcement of a $10 billion reduction to the Fed's $85 billion a month bond-buying program.
To avoid more damage to the fragile U.S. housing market, the reduction is expected to be in the central bank's purchase of Treasuries, not mortgage-backed securities. [We explain just how fragile the housing market is in "The All-American "Short Squeeze" No One Else Sees"].
But the move could still rattle silver prices.
If the Fed doesn't taper, the knee-jerk reaction is likely to send silver prices higher.
Until Wednesday, investors will be in a wait-and-see mode.
Silver Prices Last Week
Silver investors are coming off a volatile week.
Silver futures for December delivery, the most actively traded silver contract, fell 1.9% Thursday to $21.72 an ounce. Intra-day, the white metal dipped as low as $21.42, its lowest level since Aug. 14. Silver fell to a one-month low of $21.35 an ounce Friday before staging a comeback, adding $0.53, to close at $22.26. Net volume was heavy, with roughly 51,000 contracts changing hands.
Yet on the week, silver prices plunged 6.85%, its steepest drop since June 21.
Despite the carnage in silver, gold grabbed most of the headlines last week. A large sell order on Thursday, for some 2,000 front month contracts, triggered a halt in gold trading for an unprecedented 20 seconds. The yellow metal lost more than $33 dollars an ounce on the day and ended the week 5.6% lower.
Silver got snarled in gold's downward spiral. Silver's slide was more pronounced, not surprising since the white metal historically is more volatile than gold.
"Silver is thus once again fully living up to its reputation of following gold's price movements to a disproportionate extent," Commerzbank said.
More Silver Price News to Watch
Fed fears aside, there are several other issues weighing on the precious metal.
Taking some of the shine off silver is the subsiding risk that the United States will launch a military strike against Syria in retaliation for suspected chemical weapon use in its ongoing civil war. As a result, silver's safe-haven status has lost some appeal - for now.
Additionally, speculation grew that Federal Reserve Vice Chairwoman Janet Yellen will become the next head of the central bank after front-runner Larry Summers withdrew his name Sunday.
Yellen, viewed as dovish, is actually hawkish when she believes it's the right time to tighten policy, as transcripts from past Fed meetings show.
Bullish Scenarios Still in Place for Silver
The summer months are known for being dull for silver, but this past August silver bucked the trend. The white metal logged an impressive 21.3% surge, outperforming nearly everything else in the market.
Indeed, silver is still on pace for the first quarterly gain since the third quarter of last year.
There are several factors stirring that should positively influence silver prices going forward.
Geopolitical tensions, Eurozone debt issues, U.S. budget debates, robust retail demand for physical silver, strong sales in India, and solid, steady inflows into silver-backed exchange-traded funds (ETFs) are all going to drive silver prices higher through the traditionally strong third quarter for precious metals.
Plus, hearty industrial demand and investor activity in China, the second-largest user of silver in the world, should also propel silver prices and cushion any price dips.
When prices do pull back, it will be temporary - and a great buying opportunity.
Now that silver is more than half off its all-time high of $49.51 hit in August 2011, bargain hunters have taken a renewed interest in the white metal - as evidenced by record year-to-date U.S. Mint sales of the popular American Silver Eagles.
Do you want a piece of the price gains in physical silver? Here's how to start.
To see what previous QE "tapers" have done to markets, check out this chart.
All About the Fed Next Week for Gold