Silver futures rally 1% as dollar weakens

Investing.com - Silver prices rose more than 1% on Tuesday, as the U.S. dollar weakened ahead to the release of key U.S. economic data later in the day to help assess the timing for a reduction in the Federal Reserve’s bond purchasing program.

On the Comex division of the New York Mercantile Exchange, silver futures for March delivery traded at USD20.17 a troy ounce during European morning trade, up 1.25%.

Comex silver prices rose to a session high of USD20.34 a troy ounce earlier.

The March contract tumbled to USD19.62 a troy ounce on Monday, the lowest since August 8, before erasing losses to end 0.13% higher at USD19.92 a troy ounce.

Futures were likely to find support at USD19.62 a troy ounce, the low from November 25 and resistance at USD20.48, the high from November 20.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.3% to trade at 80.70, moving off the previous session’s high of 81.06.

Precious metals, like other dollar-denominated commodities, can receive a boost when the greenback weakens, as it makes the futures cheaper for market participants using other currencies.

Disappointing U.S. pending home sales data on Monday reduced expectations the Fed will start tapering its bond-buying program as soon as December.

The National Association of Realtors said its pending home sales index declined 0.6% in October, confounding expectations for a 1.3% gain.

Investors are now looking ahead to a report on U.S. housing starts and building permits due later Tuesday to further gauge the strength of the economy and the need for stimulus.

Minutes of the Fed’s October meeting published last week revealed that the central bank could start scaling back its USD85 billion-a-month asset purchase program in the “coming months” if the economy continues to improve as expected.

Process of the precious metal are down approximately 34% this year on concerns the Fed would begin cutting back its easy-money policy by trimming its USD85-billion monthly bond purchasing program.

Silver tumbled along with gold during Asian trading hours on Monday, as investors reacted to news that Western powers reached a historic deal with Iran over its nuclear program.

Elsewhere on the Comex, gold for February delivery climbed 0.9% to trade at USD1,253.05 a troy ounce, while copper for March delivery inched up 0.2% to trade at USD3.236 a pound.