Fed's Position On QE Crushes Silver

By Michelle Smith — Exclusive to Silver Investing News

Fed's Position on QE Crushes Silver

Silver moved into the second quarter displaying a pattern investors are likely becoming all too familiar with, whereby the market shows signs of strength at the opening of the week, responds negatively to a midweek disappointment, and attempts to claw its way back with the approach of the weekend.

A Purchasing Managers' Index (PMI) compiled by HSBC and Markit Economics and released in March showed contraction in the Chinese economy and derailed the positive track that silver was on that week. The official PMI was due to be released Sunday night and was again expected to carry weight in the market.

This time, the PMI placed the nation in expansion territory, which is indicated by a figure above 50. According to China's National Bureau of Statistics, the nation's PMI rose to 53.1 from 51.

Though the markets were reminded that there is a pattern of China's PMI rising in March, silver investors responded positively to the news, and the data gave the market a boost, with the metal going 78 cents above last Friday's closing price.

Chinese investors provided no direction by way of their response to this data as their markets were closed until Thursday for holidays.

This boost followed the good day silver had ahead of the weekend. At times on Friday the white metal outperformed gold. By Tuesday, CME Group reported that though the silver market was off balance, overnight some bullish analysts were forecasting the potential for an upside of as much as $3 or $4 in silver prices.

Fed crushes silver

The silver market largely disregarded positive data regarding US factory orders. Tuesday was a day with something much larger on the agenda: the release of the Federal Open Market Committee (FOMC) minutes.

Throughout the first quarter, the market revealed its obsession with US monetary policy by digging into Federal Reserve statements for indications of the likelihood of quantitative easing (QE). When the FOMC minutes were released, the silver market, which had gained on what appeared to be positive indications last week, was severely disappointed when the Fed distanced itself from the likelihood of more QE.