Silver futures decline with Fed stimulus outlook in focus

Investing.com - Silver futures declined on Monday, as uncertainty over the direction of Federal Reserve policy weighed, following last week’s surprise decision to announce no reduction to its USD85 billion-a-month stimulus program.

On the Comex division of the New York Mercantile Exchange, silver futures for December delivery traded at USD21.81 a troy ounce during European morning trade, down 0.5%.

Silver prices fell by as much as 2.7% earlier in the day to hit a session low of USD21.32 a troy ounce, the weakest level since September 18. The December contract ended down 5.85% at USD21.92 a troy ounce on Friday.

Silver prices were likely to find support at USD21.22 a troy ounce, the low from September 18 and resistance at USD23.07, the high from September 20.

Silver prices plunged on Friday after St. Louis Fed President James Bullard said that the Fed’s decision not to taper its stimulus program in September was “close” and did not rule out a “small” reduction in bond purchases in October.

The Fed will hold its next monetary policy meeting on Oct. 29-30.

Silver prices soared by 8% on September 19 after the Fed decided to leave its USD85 billion-a-month stimulus program unchanged.

The decision surprised markets, which had been expecting the central bank to taper its monthly stimulus program by USD10 billion to USD15 billion.

Moves in the silver price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.

The precious metal is on track to post a loss of nearly 29% on the year as traders bet an improving U.S. economy would lead the Fed to unwind its stimulus program by the year's end.

Elsewhere on the Comex, gold for December delivery shed 0.35% to trade at USD1,327.60 a troy ounce, while copper for December fell 0.8% to trade at USD3.295 a pound.

Copper prices came under heavy selling pressure despite the release of upbeat Chinese manufacturing data earlier in the session.

China’s HSBC Flash Purchasing Managers Index rose to a six-month high of 51.2 in September from a final reading of 50.1 in August.

The measure remained above the 50.0-mark for the second consecutive month, indicating expansion in manufacturing activity.

Copper traders consider shifts in the HSBC PMI an indicator of China's copper demand, as the industrial metal is widely used by the sector.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.