Silver prices are on the rise, and historic data shows that this could be just the beginning for this rally…
The Federal Reserve’s tightening monetary policy is one of the silver price catalysts that’s helped start this latest rally.
Silver is already 5.5% higher since the Fed’s Dec. 13 decision to hike interest rates for the third time this year. And if this rally is anything like past end-of-year rallies, then we may have only seen a third of the possible gains we’ll make by the end of February.
What’s more, precious metals are becoming divorced from rising interest rates, which means their growth potential isn’t bogged down by the Fed’s policies.
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It makes sense. Consider that Trump’s tax cuts are expected to add $1.5 trillion to the country’s debt over the next 10 years, according to the CBO. That gives silver investors a reason to bet against the dollar.
Add it all up, and the silver price rally we’re seeing is just getting started.
Today, I’ll show you just how high silver prices in 2018 can go. But first let’s look at the silver price movement from last week…
Why the Price of Silver Jumped Ahead of the Holidays
It was a flat week for silver until the last trading day before the Christmas holidays.
Silver began on Tuesday, Dec. 19, with some lackluster action, even as the dollar was retreating. The DXY stayed below 93.45, and silver moved quietly sideways, opening at $16.16 and traveling slowly downwards to end at $16.12.
On Wednesday, the DXY clung to 93.3. Silver managed to open a little higher but again moved essentially sideways. Only by late afternoon did the gray metal weaken. At the 5:00 p.m. New York bell, the price of silver had fallen slightly to close at $16.16.
Thursday brought a slight gain in the U.S. Dollar Index, which closed at 93.35. That motivated silver sellers. The metal began New York trading at $16.11 and grew to $16.21 by mid-morning, but gave that all back to end the day at $16.10.
Here’s how the DXY moved over the past five days, where you can see the DXY decline that helped boost silver prices…
On the Friday before the Christmas holiday, action returned to the silver markets.
At mid-morning, the DXY popped to test the 93.50 level but quickly retreated to 93.35. That was silver’s cue to rally. Silver prices opened at $16.18 then jumped to $16.38 by noon. Silver eventually closed at $16.37.
On Dec. 26, silver rallied further even as the dollar index made another short-lived attempt to rally. Silver opened higher still at $16.44 and gained steadily through the day to close at $16.52.
And finally, on Tuesday, Dec. 27, the DXY weakened to test the 93 level. That pushed silver higher yet. It began New York trading at $16.55 and by late morning had rallied to $16.69, a level it last saw about a month earlier.
Now that silver prices are at a December high and approaching their highs from November, I think silver is ready to rise to a whole new level. Here’s my silver price prediction to start 2018…
Where Silver Prices Are Heading Next
After a healthy week that pulled silver about 4% higher, let’s now examine the action to make some educated guesses about where we might be headed now.
First, let’s look at the DXY’s movement since July…
We remain at the threshold that could signal a new sell-off in the dollar. The technical head-and-shoulders price pattern I recently described – underlined in green – is now completed with the “right shoulder” in place.
We now have to watch for a distinct break down below 93, then watch for it to fall to the 91.50 level. The dollar’s momentum is clearly negative, so odds are good that lower is more likely.
Second, we’ve seen a tremendous rise from the mid-December silver price lows near $15.70.
Even though silver prices are trending up, the 50-day level could act as a bit of resistance. So it wouldn’t surprise me to see silver pull back at least a bit rather soon.
But that will only be temporary. The rally we saw that began in July could be a great template for how the current one plays out. You can see silver prices saw a pullback in early August before launching even higher into September.
It took silver to $18 for a nearly 17% rally in two months. I think we could see very similar action this time around.
That would bring silver up to $18 by the second half of February and represent a 15% gain from two weeks ago.
The good news is we’re still early in this rally.
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