Silver price consolidates near four-month high ahead of ECB meeting

on Jan 22, 2015

The price of silver has held on to most of its recent gains so far in today’s trading sessions ahead of the European Central Bank’s (ECB) monetary policy meeting later in the day. Investors have decided to remain mostly cautious amid speculation ahead of the announcement of a potential quantitative easing (QE) asset purchasing programme.

Silver for immediate delivery had shed nine cents, or 0.5 percent, to $18.02 as of 07:14 GMT, and was trading 9.8 percent above its 50-day simple moving average of $16.41. Yesterday, the precious metal reached $18.46, the highest level since 19 September.
Silver has rallied 15.7 percent since the beginning of the year on safe-haven bids from political and economic uncertainties in Europe, along with concerns over a downturn in the global economy. Later today, ECB president Mario Draghi is expected to announce a full-blown quantitative easing programme after news emerged yesterday of proposed bond buying of €50 billion per month for at least a year in a bid to lift the eurozone’s meager inflation closer to its two percent target.

According to FastMarkets analyst Tom Moore: “Confirmation of euro weakness should bolster dollar strength, putting metal prices under growing downside pressure in dollar terms. This would normally be bearish for the precious metals […] but we believe that an announcement of a larger-than-expected package” would cause the US dollar and precious metals break their inverse relationship and trade in tandem,the ECB’s press conference is scheduled to begin at 13:30 GMT.

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The price of silver for March delivery had fallen 12 cents, or 0.68 percent, to $18.03 as of 07:05 GMT. Scotiabank wrote in a report from yesterday that resistance continues to lie at the 200-day moving average of $18.41, with the precious metal managing to pierce above the level during yesterday’s intraday trading. According the bank: “A close above this level would provide confirmation of further gains, and we note that momentum indicators hint to acceleration.”
Based on the two most actively traded COMEX contracts, with a total volume of trade in gold and silver of 22,798 contracts as of 07:05 GMT today, the gold:silver ratio was at 71.40. Last Thursday, the ratio closed at 73.83.


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