Why the Price of Silver Is Down This Week and Where It's Headed Next
Peter KrauthI'm excited about silver.
Now let me first say I know what happened to the price of silver over the last week. The precious metal is down 2%, and that's after the Fed rate hike is finally out of the way.
I also know the U.S. Dollar Index (DXY) is up over that same time. In fact, it jumped some 150 basis points, driven by both the rate hike and weakness in the euro.
But remember, gold tends to put in a low around the time we get rate hikes, and it also tends to put in a seasonal bottom around mid-June. And silver tends to follow gold's lead.
If you consider too that Trump's trade wars may put pressure on the dollar, then we could begin to see weakness creep back into the DXY.
What's more, one of my favorite silver-strength indicators has remained within its bullish trend, suggesting silver prices have much further to climb.
Before I show you my newest silver price forecast, here's how the precious metal has been moving…
Why the Price of Silver Is Down This Week
The Fed's 0.25% rate hike came in as expected on Wednesday, but Powell's comments suggest a fourth rate hike this year could be in the cards. That underpinned the dollar's renewed strength, aided by a weak euro. The euro slipped after the European central bank promised on Thursday there would be no rate hikes for at least a year.
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So despite silver's impressive gains early in the week that took the metal from $16.80 to $17.26, the Fed's somewhat hawkish stance and the rebounding dollar were too much for silver prices to overcome, at least temporarily.
Here's how silver and the DXY reacted to the Fed hike:
But since then, silver's been digesting the bullish reaction by the dollar on Thursday:
That dollar rally put what looks like a kibosh on silver's recent strength.
On Friday morning, the selling began in earnest. That's when silver fell through the floor. After opening at $17.18, it dropped to $16.46 by 2 p.m., then closed at $16.54. Sentiment remained weak and although the DXY moved sideways, silver ended Monday at $16.44.
Here's where I think the price of silver will head from here…