Comex silver fell to an eight-day low under $6.50 an ounce on Wednesday, the biggest loser in a precious metals rout after firmness in the dollar, prompted on Tuesdays Federal Reserve interest rate hike, triggered heavy liquidation by commodity funds.
Benchmark September silver bottomed at $6.46, equalling a loss of 3.7 percent, during the first of New York metals trade after the Fed raised the federal funds target rate to 1.5 percent from 1.25 percent on Tuesday afternoon, explaining that it saw a slowdown in economic growth as temporary and due to higher energy prices.
"It got hit for same reason gold got hit," said Tom Boustead, an analyst at Reface Inc. "The Fed policy statement showed the Fed still looking for measured increases in rates. That took the euro lower and gold and silver went along with it."
The contract settled down 19.5 cents at $6.527 an ounce. It set a high of $6.745 in early trade. Spot silver was last priced at $6.50/53, down from $6.69/72 on Tuesday night, and the fix in London was at $6.60.
Speculators took profits on bets that silver prices would keep going up. Many of their positions were booked when the metal was rising to a 3-1/2-month high on Monday of $6.90.
Estimated volume was 17,000 contracts, heavier than on Tuesdays official 10,402. But the silver market is much less liquid than gold, and the lack of participants during the summer has made swings even larger than normal, dealers said.
"Massive technical liquidation," said Robert Gottlieb, head of bullion trading at HSBC. "It started from the beginning of the day. They've been buying all the way up." Leading silver, but not falling as steeply, Comex December gold fell $4.40 to settle at $397.90 an ounce, trading from $403.40 to $395.30.
About 45,000 contracts changed hands. Spot gold fell to $395.00/50 from $399.90/0.40 late on Tuesday. London's afternoon fix was $393.85. Gold weakened as investors bid the dollar up slightly in the less confident than they was this week that the Fed would refrain from raising rates at every opportunity this year.
The central bank increased rates on June 30 for the first time in four years, but economic data since then has shown the economy slowing down from the first quarters healthy pace. Markets now believe the Fed will keep ratcheting rates up at a measured pace to prevent economic overheating and bring rates back to neutral after 13 cuts since January 2001.
Nymex October platinum fell $13.50 to $836.90 an ounce, from a 16-week high set on Tuesday.
Spot platinum fetched $834.00/839.00. September palladium went down $4.60 to $213.40 an ounce. Spot palladium closed at $210.00/215.00.