Silver Price Forecast: Signs of a Bounce-back in Store?

Friday, July 21, 2017

silver coins

After starting off the morning on a sour note, precious metals have taken an upswing back to where the latter end of this week seems to be pointing: there is indeed some optimism for both gold and silver. There may even be optimism extending beyond that, even through complicated headlines (but when have headlines in 2017 not been complicated) and a continued cautious optimism in the markets at large.

What does this all spell for silver? Let’s go beyond our usual look at the value of the U.S. dollar and common silver factors to dig deeper. How can we forecast silver’s success for August and beyond, and are the signs of a bounce-back already rearing their heads in the market?

Current Status of Silver

For those who haven’t been following so closely, silver’s price in early July showed signs of a fresh dip that threatened to take the precious metal to year-long lows—and indeed did, with gold sinking well below $16 per troy ounce. Currently, silver has rebounded back to the mid $16 range, which is a healthier spot for the precious metal. And while this might not seem like a good time to “buy the proverbial dip,” the truth is, for most of the year, silver has been trading higher than its current price.

But past performance is not necessarily indicative of future performance, especially when it comes to short-term predictions. That’s why we have to look at other factors and try to determine if silver has legs for the rest of 2017.

Beyond the U.S. Dollar Index

If you’ve been paying attention, you’ve seen gold and silver perform well while the U.S. dollar sinks. This traditional interplay between metals and currency is a sure way to find some sense of where prices have been heading. Indeed, the U.S. dollar’s weaker performance to finish of the week—thus far—suggests that there may indeed be legs for metals like silver.

But let’s go beyond that index and ask what else in silver’s price may point to its destiny in August and beyond. Let’s go beyond even the Federal Reserve factors, which of course has a lot to say about DXY and the value of the dollar.

What we have to look at are the rate at which investors flock to alternative investments like bonds and metals in order to hold on to their currency. It’s clear that these investors have been waiting out silver’s potential throughout the year. Dips are short-lived, which suggests many investors may in fact be buying on these dips on a regular basis. That suggests more of a hidden market for silver than one might expect. Although the overall trendline for silver has pointed down in recent months, the fact that silver is continuing to show “bounce-back” at every turn is worth watching.

If anything, it might suggest that the next dip in silver will be a tremendous buying opportunity for the precious metal, especially for those investors who expect the metal to catapult back up to $20 per troy ounce in short order. There are no guarantees here, but a closer look at silver investing will reveal more strength than just an inversion of the U.S. dollar.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.