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How the Fed Has Moved Silver Prices in 2014

For all the discussions of inflation and labor market conditions going on at the U.S. Federal Reserve's policy meetings this year, it would be expected that the Fed's words would be felt in silver prices in 2014.

Fed has had marginal effect on silver prices in 2014Silver is a precious metal investment like gold, and when fears of inflation arise it attracts investor interest as an alternative investment to hedge against a weakening dollar. Gold is the premier precious metal, but when traders begin to pour into gold, silver will get residual investor interest.

And it will generally move more dramatically than gold, because trade volume is significantly smaller for silver than its sister metal.

"The silver market is tiny compared to the gold market," Richard Checkan, president and chief operating officer of Asset Strategies International told Money Morning. "It's like throwing a rock into a lake versus a puddle; the relative splash is much bigger in the puddle."

Silver's price moves this year highlight its volatility. It has gained as much as almost 5% in a single day, and lost as much as 3%.

With the Fed this year continually echoing the refrain that interest rates will remain low for a "considerable" period, the ground would seem fertile enough for huge gains in silver, given that a long period of accommodative monetary policy, such as a low interest rate environment, is more conducive to inflation.

But this year, that hasn't been the case…

Silver's Moves on FOMC Days

For being as volatile an asset as silver is, on days where the Fed occupies headlines – either through its Federal Open Market Committee (FOMC) meetings or the meeting minutes release that occurs three weeks later – the white metal has generally moved only very marginally.

Just check out the following chart of silver price moves on Fed news days…

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