With Donald Trump's win in the 2016 presidential election, Republicans now control the White House, Senate, and House of Representatives.
That removes a lot of the uncertainty investors have been fearing. While that may sound bearish for silver prices in 2017 at first, I still see double-digit gains for the precious metal next year.
In fact, if you look at how silver prices performed in the lead up to the election results and following them, you'll understand what I mean.
In my view, a Trump presidency combined with Republican control of the other two branches will be good for the price of silver.
Inflation is likely to take deeper root and accelerate further. Infrastructure buildout to the tune of $500 billion, along with a weaker dollar, should help underpin higher inflation.
There's also the prospect of rising industrial demand for silver. Roughly 70% of consumed silver ends up in industrial applications and renewable energy products like solar panels.
If Trump can push through some of his promised policies like corporate tax cuts, it would go a long way to stimulate manufacturing. And that would boost the need for silver in electronics and other high-added-value products.
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Here's how high I see silver prices in 2017 climbing...
Our New Price Target for Silver Prices in 2017
Much like gold prices, silver prices spiked as news emerged that Trump would likely win the Electoral College vote. But as it became clearer that Republicans would control both the House and Senate, the markets breathed a sigh of relief because it removed uncertainty. It also decreased the risk of political logjams.
Silver prices backed off the day following the election, giving up most of their gains in the previous 24 hours. But on Thursday, two days after the election, the price of silver rose despite gold falling.
Here are some of the likely policy moves by Trump and how they could affect silver prices in 2017...
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Central to Trump's platform is cutting corporate tax rates. He's indicated he wants to lower these from 35% to 15%. That could be key to kick-starting the manufacturing sector. In turn, we could see industrial demand for silver, its biggest driver, boosted especially in the electronics industry, where it's used for connections and soldering.
While Trump has been talking down energy regulation, he's also hinted at doing away with subsidies for renewables. Some may think that would work against solar, but most financial incentives actually come from individual states. What's more, the Republican Congress recently prolonged the Production Tax Credit for renewable energy through 2021, making for another impediment against an attempt by Trump to end the program.
According to Byron Capital, silver consumption in solar panels could swell from 20 million ounces to 185 million ounces annually within a decade. That's huge, at nearly 20% of total current demand.
As I outlined in my 2017 Gold Outlook, Trump's platform calls for massive infrastructure spending that could lead to huge deficits, requiring still more federal borrowing. All of this will simply build further on the nation's existing $20 trillion debt.
Trump has also called for a weaker dollar, which if achieved, should help. It would make U.S. exports cheaper, and foreign sales more valuable for U.S.-based companies. It would also lead to higher costs for imports.
All of this is inflationary, and the bond market already senses it. In fact, 30-year yields are up nearly 14% in just the last week from 2.57% to 2.92%, a massive increase over a very short time.
This is exactly the kind of environment where a precious metal like silver, a tried and true inflation hedge, will thrive.
So if you add it all up, Trump in 2017 should push silver prices much, much higher. I expect we'll see silver reach $26 before next year is out.
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