Silver Gains Big After Fed's Decision

Silver has had an incredibly strong year thus far, and the price of the metal continues to push upward. The most recent information that's pushing silver upward is news from the Federal Reserve. Today, we'll talk about the news, why it matters, how the market reacted, and what we can expect to see from the price of silver moving forward.

Federal Reserve Delays Interest Rates Yet Again

For some time now, all eyes have been on the Federal Reserve. In 2014, the Central Bank made the decision to put an end to quantitative easing. At the same time, they announced that they would be increasing their interest rate in the year 2015. While tough economic times caused the Fed to delay increasing its interest rate through the most of the year, they finally got their chance in December of 2015. That's when the Fed increased its rate from the record low 0.25% to 0.5%.

When the Fed increased its interest rate in December, it said that it was planning on further increases throughout the year 2016. However, once again, tough economic conditions in the United States, and around the world, have hindered their plans. Yesterday, the Fed announced that it would not be increasing its interest rate in the month of June due to a concerning slowdown in jobs growth in the United States.

Why This Matters

To understand why this matters, it's important to understand what the Federal Reserve's interest rate is and what it represents. You see, years ago, the United States decided to leave the gold standard. Since then, instead of the USD being backed by gold, the currency has been backed by trust and interest.

As a result, when the Federal Reserve reduces its interest rate, what it's really doing is devaluing the USD. Adversely, when it increases its interest rate, it is essentially adding value to the USD.

This tends to cause movement in the price of silver. You see, silver is priced using the USD. Therefore, when the value of the USD gains, silver becomes less accessible around the world thanks to currency exchange rates. This leads to declining demand, and, ultimately, declining prices. Adversely, when the USD falls in value, silver becomes more accessible around the world, leading to gains in demand, and gains in the price of the precious metal. The fact that the Fed once again failed to increase its interest rate has caused the USD to fall slightly, leading to gains in the value of silver.

What We Can Expect To See From Silver Moving Forward

If you've followed my work, either here or elsewhere, chances are that you know my opinion on silver. The truth is that I've maintained a bullish opinion on the precious metal for about a year now, and continue to maintain this opinion. There are a couple of big reasons that I maintain a bullish opinion on silver.

• Economic Conditions – As a safe-haven investment, silver tends to climb in value when economic conditions are negative, as investors and consumers look to the precious metal as a way to keep their money safe. Currently, economic conditions in the United States, and around the world, are overwhelmingly concerning. With US job growth seeing hard times, Europe facing a Brexit, and Asian countries working to improve economic conditions, things just aren't looking great economically. This will likely continue to increase safe-haven demand, leading to gains in the price of the precious metal.

• Market Conditions – Another big key here is the condition of the market. As a safe-haven investment, silver tends to do best when market conditions are negative. Because of economic fears currently circling the market, market conditions aren't positive either. Ultimately, more declines are expected, which will likely lead to further gains in the price of the precious metal.

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