Silver price action this week, though muted, has shown some slight bullishness.
With gold essentially flat, the price of silver has managed to gain nearly 1.5% as it rises from price and sentiment lows.
The other thing that may be motivating silver buyers is the extreme level of the gold-to-silver ratio.
Since recently bumping up against 85, a level not seen in over 25 years, the ratio has pulled back as savvy investors are starting to scoop up the deep-value metal.
Now, silver is likely to wait and follow gold’s lead as we move into the next FOMC meeting this week. My take is the dollar could see a bounce from the expected rate hike, then sell off in the following days.
From there, I think we could see essentially the reverse happen, with the dollar selling off and silver and gold beginning to rally.
Before I get into my newest silver price prediction, here’s a closer look at this week’s action…
Here’s How the Price of Silver Is Trending Now
Though not outstanding, silver prices did make some progress over the last five trading days.
The grey metal has managed to stay solidly above $14 despite a somewhat neurotic dollar index.
The Clock Is Ticking: Millions of American retirement plans hang in the balance – and if you’re not doing this, you’re in for a nasty shock in a few weeks. Click here now…
Even with trade tensions ebbing and flowing, markets have been grinding higher. And that continues to attract capital as investors are increasingly feeling left out of this multi-year rally.
The dollar index was consolidating around 94.5 in the early part of last week. But silver was still able to muster a gain, moving from about $14.10 to $14.24.
Even so, renewed dollar strength after the DXY dropped to 93.90, then regained 94.25, caused silver to retreat from a high of $14.40 early on Friday to end Monday at $14.23.
Now, here’s what we can expect from the price of silver going forward…
Here’s My Long-Term and Short-Term Silver Price Prediction
The dollar has continued weakening and just bounced from the bottom of its multi-month range.
After touching the lower bound support at 93.5, the DXY is up slightly. I think this is in anticipation of the expected Fed rate hike. Also, the fact that the relative strength index (RSI) had reached down near 30 meant some sort of relief buying was to be expected.
I think this strength will be short-lived. The dollar has been selling off pretty hard since mid-August. It’s likely that the rate hikes of this week and December have been priced in by the market. That’s why I don’t think that any dollar strength has real legs.
I believe we’ll see a resumption of the dollar’s downtrend, which is likely to pull the DXY at least to 92.5, the current 200-day moving average, and then possibly lower to test the 88.5 – 90.5 range of February to April.
Silver’s very recent action continues to look constructive.
Confirming this recent action are both the RSI and moving average convergence divergence indicators which have been trending upward simultaneously.
As well, fresh moves in the gold-to-silver ratio are showing the start of a reversion to the mean.
The ratio just recently peaked at an extreme of 85. We have to go all the way back to September 1993 to see the ratio reach such levels.
Back then, the ratio quickly dropped to 66 shortly after. And since 2003, each time the ratio approached 80 it soon dropped back to at least 66, and more typically 55.
At current gold prices, a gold-to-silver ratio of 66 would mean silver soaring to $18, for a 50% gain. And yet $18 doesn’t seem at all far-fetched, as silver traded there as recently as April last year.
In the near term, I’d expect silver to regain $15 the wake of this week’s expected rate hike, then follow on to about $15.60 as silver regains its July/August consolidation level.
How to Survive – and Profit – from the Greatest Economic Crisis in 75 Years
The stock market crash of 2008 is nothing in comparison to the maelstrom that’s brewing now – 2018 will be the year of the greatest economic crisis of the century.
Jobs will suffer, the housing market will spiral downward, and millions of American seniors will face bankruptcy.
But if you know how to prepare, you’ll be one of the few lucky ones.
Follow Money Morning on Facebook, Twitter, and LinkedIn.
About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.
Disclaimer: © 2018 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.