Did Silver Price Drop

The Federal Reserve announced last Wednesday (18th December) it would start to taper the aggressive bond-buying program from $85 billion to $75 billion a month beginning in January 2014.

In layman terms, it means Federal Reserve is suggesting they are going to slow down money printing because the economy is recovering. They are going to print less of $10 billion each month starting January 2014.

Silver price has dropped as a reaction to the announcement:

silver-price

Some investors who have been waiting for the perfect time to buy silver have decided to make a move to purchase silver. However they are surprised that silver price did not significantly dropped in their final purchase price (in Ringgit).

The reason is because when Fed announced US economy is recovering (by tapering QE), that also means USD will be strengthen. Unless Ringgit was still peg to USD, a strengthen USD basically means a weaker Ringgit.

Exchange rate went up to as high as $1 = RM3.2970 last week

usd-myr

Ideally when silver price drops, investors would be able to buy silver with lower cost. However, during this drop (driven by strengthen US economy), USD value went up and have off set the final purchase cost in Ringgit.

Compared to other investment class (such as shares in KLSE or property in Klang Valley), silver has an additional variable which is currency exchange rate. When you approach your local silver dealers, some will factor USD/MYR exchange rate into final selling price while some would not. A lower silver spot price in the international market does not always guarantee a lower silver price in Malaysia.

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