The silver price has bounced back strongly from its low over two weeks ago. The price of silver is coming off a strong 3.7% gain last week and is now up 7.4% to $16.51 from its July 7 low of $15.37. Not to mention, silver futures have suffered only one down day in the last 10 trading days.
The 7.4% rebound since July 7 has come in small increments, but it’s been steady and stealthy. The average daily gain for silver prices since the July 7 low has been 0.6%, and that stealth growth may be most helpful for looking at where silver is headed in 2017. As silver climbs quietly higher, it continues to “feel” like sentiment is still against it.
Yet those are often the times when a price advance is the easiest to achieve, because it goes mostly unnoticed, bringing along fewer bulls for the ride higher.
I’m one of those bulls, which is why I’m going to share my bold silver price prediction with you today.
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But first, let’s look at the price of silver’s big week last week…
Silver Price Rises 3.7% on the Week (July 14 – July 21)
After closing at $15.88 on Friday, July 14, the silver price opened Monday, July 17, higher at $16.11. Although it trended lower throughout the day, the metal still closed at $16.08 for a 1.3% gain on the day.
And that set the positive upward trend for the rest of the week…
On Tuesday, silver benefited from accelerating dollar weakness. As the U.S. Dollar Index (DXY) fell from 95.13 to 94.60 by Tuesday’s close, silver prices climbed throughout the day to peak at $16.28. Silver prices eventually settled 1.1% higher at $16.26.
Here’s a snapshot of the DXY’s day-to-day movements last week…
Some overnight weakness caused the price of silver to open lower at $16.25 on Wednesday. Although it reached a high of $16.31 that morning, it eventually closed the day at the opening $16.25 price, marking a small 0.1% loss from the Tuesday close of $16.26.
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Thursday brought more of the same action, with silver weakening in early morning trading to bottom at $16.16 by 8 a.m. But buyers came in strong later that morning as the dollar sold off hard, falling an astounding 100 basis points to the 94.25 level by 11:30 a.m. That pushed the silver price to $16.30 by the close for a 0.2% rise on the day.
On Friday, July 21, silver rallied to $16.40 in the morning as the DXY fell lower to 94.20. As it fell below the 94 level, silver prices leaped to $16.50 by the end of the session. That marked a 1.2% gain on the day and a 3.7% gain on the week.
And the price of silver today (Monday, July 24) is up another 0.1% and trading at $16.51. If it closes above $16.50 today, the metal will have seen its seventh straight session of gains.
With last week’s 3.7% rally, investors are anxious to know if the metal will keep moving higher. Despite possible short-term price pullbacks based on dollar fluctuations, I think the silver price has plenty more room to run in the second half of 2017.
Here are my bold silver price targets for the rest of the year…
Why Silver Prices Could Hit These Bullish Targets in 2017
While obvious dollar weakness helped lift the price of silver last week, I think silver’s strength moving forward will come from bearish trading speculation…
Based on the latest Commitment of Traders (COT) reports, large speculators have become distinctly bearish on silver. We’re now at a point where silver has entered into an overall net short position of 194,699 contracts for the first time since August 2015.
Joni Teves, a strategist at UBS, even told Kitco News that silver trading behavior has become similar to gold in that long positions – or the number of contracts owned by traders indicating long-term bullishness on silver prices – have fallen by 67% since mid-June.
But Teves said that unlike gold trading, selling behavior in silver has been due to rising short selling. According to her interview, silver gross shorts have surged by 219 million ounces over the last five weeks to reach an all-time high of 470 million ounces as of July 11.
I think silver’s consistent rise over the past 11 trading days since the July 7 bottom was at least partially the result of short covering. The 470 million ounces short silver represents an incredible 46% of annual silver demand.
And since the all-time high of short positions represents peak negative sentiment, long-term silver price sentiment could only become more bullish from here.
So where could the metal’s price be headed next? If we take a look at this silver price chart here, the metal looks poised to move back into the range indicated by the green bars…
I think the next leg higher for silver will be above the 50-day moving average of $16.66. From there, I can see it reaching the 200-day moving average of $17.18– a 4.1% gain from today’s price of $16.51.
If the dollar continues to weaken and traders keep covering their shorts as they likely have been over the last 11 sessions, silver prices could even challenge the April high of $18.50 within just a few months. That would be up 12.1% from today’s level.
The Bottom Line: Silver’s 3.7% rally last week continued to prove that silver reached a definitive bottom on July 7. With that behind us, I expect the silver price to keep heading higher as the dollar continues lower and traders try to cover their short positions, whose all-time high right now indicates bearish sentiment can only decline from here.
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