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Silver tends to mirror gold's price movements, both up and down – but with leverage.
However, there's another factor most are underestimating in relation to silver prices. And although the Fed omitted any mention of it last Thursday, I believe it was central to their decision on interest rates.
It's like "rocket fuel" for precious metals – especially silver. Take a look…
Silver Price Struggles to End Cyclical Bear
Much like gold, silver prices started out the year strong, rallying from about $15.75 to $18.50. Here too, many investors hoped the cyclical silver bear that started in April 2011 was finally ending.
But by mid-March, silver had already corrected back to $15.50, erasing all those gains and even giving some back.
That had the hallmarks of a capitulation, because it was a quick drop from $15.50 to $14.11. But silver recovered more than the market, and two weeks later had a small retest that brought it only to the $14.40 level. That appears to be a classic higher low.
Along with gold, this action just might have cemented the end of silver's nearly four-and-a-half-year correction.
Let's now look at the price action in silver and silver stocks in the week leading up to the Fed rate decision…
Silver Stocks Rally Ahead of Fed News
The Global X Silver Miners ETF (NYSE Arca: SIL) is a good proxy for the world's largest silver miners and royalty companies.
Much like GDX, the gold miners and royalty ETF, SIL touched its lowest level ever, $6.04, intraday on Sept. 11. And yet strong buying came in and helped reverse the trend for SIL to close up at $6.33 for that day, 4.8% higher than that day's low.
Now let's compare what the SPDR S&P 500 ETF (NYSE Arca: SPY), silver, and silver stocks did in the trading week leading up to the Sept. 17 Fed decision.
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.