Silver on MCX settled up 2.23% at 47169 moved higher following confirmation from the Fed that interest rates were on hold at the September meeting, although the gains seen earlier in the day were perhaps more noteworthy. In its comprehensive monetary policy assessment, the Bank of Japan abandoned the formal monetary base target and will now manage the yield curve with buying of government bonds aiming to keep long-term yields around 0.0%.
There was still a pledge to expand monetary policy until inflation is stable above the 2% target. The commitment to pushing inflation higher was, therefore, strengthened given the target of a rate above 2%. The bank left interest rates at -0.1% for excess reserves, although there were comments that it could extend negative rates if needed and all policy tools were available. There was no immediate change to the bond-buying target. The dollar gradually reversed gains during the European session, which helped pull silver prices steadily higher.
The Bank of Japan move also helped maintain expectations that global interest rates would remain at very low levels with expectations that the Federal Reserve would not sanction a short-term rate increase. As expected the Federal Reserve left interest rates on hold with the Fed Funds range at 0.25-0.50%. The statement stated that the case for a rate hike had strengthened, but the committee decided to wait for further evidence.
Three members dissented with the Boston, Kansas City and Cleveland heads calling for an immediate hike. Reaction to the Fed decision will continue to be watched very closely on Thursday with a notable focus on the dissenters. Technically now Silver is getting support at 46265 and below same could see a test of 45360 level, and resistance is now likely to be seen at 47700, a move above could see prices testing 48230.
--Silver trading range for the day is 45360-48230.
--Silver gained after BOJ announced new monetary policy measures and as investors awaited the outcome of the Federal Reserve's meeting.
--The Federal Reserve left interest rates unchanged, but signaled that a rate increase was likely before the year’s end.
--Fed Chairwoman Janet Yellen stated that the fed remains data dependent, “and the recent data just does not support a move higher.”
Courtesy: Kedia Commodities