Silver rallies more than 1% on QE outlook

Silver tracked golds upward direction on Wednesday. The metal gained more than 1% as market players awaited Feds meeting statement later today to assess whether the central bank will taper its monetary easing program in the upcoming months or that will be postponed.

On the Comex division of the New York Mercantile Exchange, silver futures for September delivery traded at $19.930 per troy ounce at 10:19 GMT, marking a 1.27% daily advance. The precious metal snapped a four-day losing cycle after slipping 0.28% on Tuesday and trimmed current weeks decline to 0.2%.

Silver rose on Wednesday, supported by a weaker dollar. Following the overall controversial mixed U.S. data this week, the dollar swung between gains and losses and remained almost unchanged. The dollar index, which measures the greenback’s performance against a basket of six major peers, traded at 81.88 at 10:24 GMT on Wednesday, down 0.06% on the day. The September contract surged 0.16% on Tuesday and has so far advanced 0.14% on the week after falling more than 1.6% in the preceding two.

Market players remain cautious ahead of Fed’s meeting statement that will be released at 18:00 GMT. Silver’s price has largely been tracking shifting expectations of an earlier-than-expected deceleration of Fed’s monetary easing program. The metal is used mainly as a hedge against inflation, which accelerates when a central bank eases money supply. An exit from a program such as Quantitative Easing would deliver a heavy blow to precious metals’ price as its demand will crumble. The precious metal has declined 34% this year after Ben Bernanke announced Feds will likely taper its bond purchasing program within the second half of the year and bring it to an end by mid-2014. Silver is the the worst performer in the S&P GSCI Index of 24 commodities.

Market players will also be keeping an eye on other upcoming U.S. data to gauge the strength of the U.S. dollar. Apart from the employment data throughout the week, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released on Wednesday and Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders are due on Friday.