Silver futures surge more than 4% on Fed stimulus view

Investing.com - Silver futures surged to a three-week high on Thursday, after comments by Federal Reserve Chairman Ben Bernanke helped ease concerns over the possibility the central bank will begin to taper its bond-buying program in the near future.

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

On the Comex division of the New York Mercantile Exchange, silver futures for September delivery traded at USD19.98 a troy ounce during European morning trade, up 4.3% on the day.

Comex silver prices rallied by as much as 5.3% earlier in the session to hit a daily high of USD20.24 a troy ounce, the strongest level since June 20.

Silver prices were likely to find support at USD18.67 a troy ounce, the low from July 8 and resistance at USD21.23, the high from June 20.

At an appearance in Boston late Wednesday, Fed Chief Bernanke said that “highly accommodative” monetary policy will be needed for the “foreseeable future,” citing low levels of inflation and the high unemployment rate.

The comments came after the minutes of the central bank’s June policy meeting showed that Fed policymakers remain divided over when to begin tapering its USD85 billion-a-month asset purchase program.

Around half of Fed policymakers believe the bank should start to scale back bond purchases by the end of the year, while others believe the labor market still remains too weak.

The U.S. dollar came under broad selling pressure as expectations grew the Federal Reserve would keep its loose monetary policy in place.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 1.3% to trade at 83.13, the lowest level since June 25.

Dollar weakness usually benefits silver, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Silver prices are on track to post a loss of almost 33% on the year, amid speculation the Fed will start to unwind its bond purchasing program in the coming months.

Bernanke said last month the bank could begin tapering its USD85 billion-a-month asset purchase program by the end of 2013 and wind it down completely by the middle of 2014 if the economy picks up as the central bank expects.

Elsewhere on the Comex, gold for August delivery rallied 3% to trade at USD1,284.75 a troy ounce, while copper for September delivery jumped 2.9% to trade at USD3.180 a pound.