Silver rallies more than 4% on Fed comments

Silver surged more than 4% on Thursday to a three-week high following comments by Fed Chairman Ben Bernanke, which dampened concern over an earlier-than-expected deceleration of the central banks monetary easing program.

On the Comex division of the New York Mercantile Exchange, silver futures for September delivery traded at $20.040 per troy ounce at 8:45 GMT, up 4.57% on the day. The metal rose 5.3% in the early European session, hitting a three-week high of $20.245 an ounce, while days low stood at $19.145. Silver has advanced more than 6.1% so far this week after plunging near 6% during the preceding two.

The precious metal has been gaining throughout the week but marked its biggest gain on Wednesday as the dollar plunged following the minutes from FOMCs June minutes and Ben Bernankes speech later in Boston. Protocols from the FOMC’s June meeting showed that policymakers were divided in their opinion about the future of Quantitative Easing. Around half of them believe the central bank should start winding down bond purchasing by the end of the year, while the rest think the labor market remains weak, citing the latest Unemployment Rate reading.

Later on, Ben Bernanke dampened investors’ speculation of an earlier than expected deceleration of Fed’s monetary easing program. He said the U.S. economy needs Fed’s accommodative monetary easing program over the near-term as while the manufacturing sector, housing industry and other sectors from the industry have improved, the latest 7.6% unchanged reading of the Unemployment Rate pointed at a fragile labor market. Meanwhile, inflation remained stable and low, giving the central bank more room to ease money supply. This comes after in June Bernanke pointed at an imminent scaling back of the monetary stimulus and an end to it by mid-2014, if the needed recovery signs were provided.

Ed Meir, an INTL FC Stone analyst, said for Reuters: “The Fed minutes stabilized markets, then we really took off when Bernanke spoke – he sounded more dovish than the minutes. Its swinging the pendulum from an imminent cessation of easing to one where were not sure if hes going to pull the trigger in September.”

Following the announcements, the dollar index plunged, thus driving commodities across the board up. The dollar index with September settlement settled 1.4% lower on Wednesday after marking a new three-year high of 84.96 earlier in the day. On Thursday, the U.S. currency gauge extended yesterdays loss, trading at 83.23 at 8:59 GMT, down 1.15% on the day. Days low stood 82.60 .

Elsewhere on the market, gold retained its 3% weekly gain throughout the day, trading at $1 282.25 an ounce at 9:02 GMT, up 3.03%. Platinum for October delivery traded at $1 402.55, marking a 2.52% daily gain. Prices ranged between days high and low of $1 413.10 and $1 367.05. Palladium September futures stood at $724.30, up 1.47%. The metal held in range between $731.20 and $713.00 an ounce respectively.