The silver spot price is down 4.65% over the last five trading sessions thanks to a stronger dollar and upbeat economic data.
But despite this week's drop, we remain bullish on the silver spot price. In fact, we still see double-digit gains for silver prices in 2016.
Before we get into a silver price prediction, here is what has weighed on silver prices this week.
Why Silver Prices Pulled Back This Week
Silver prices today dipped $0.02, or 0.13%, to $19.25 in early trading today (Thursday) after the U.S. Department of Commerce reported in its third and final assessment that the U.S. economy grew 1.4% in Q2 2016.
That was up from the second GDP estimate of 1.1% and better than the 1.3% rise economists were expecting. It was also higher than this year's first-quarter GDP read of 0.8%.
The news sent the dollar higher. The Wall Street Journal Dollar Index rose 0.15% to 86.34 after the report. A stronger dollar pressures silver prices because precious metals become more expensive to foreign investors.
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The silver spot price slipped again Wednesday as markets rallied. The Dow rose 110.94 points after the price of oil surged. Oil prices spiked more than 5% to over $48 a barrel following reports that OPEC had reached a preliminary agreement on crude oil production. Energy stocks in the S&P 500 rose 4.3%.
Tuesday had its fair share of strong economic data, too...
Data released by the S&P CoreLogic Case-Shiller Indices Tuesday showed home prices continued higher. Home prices across the entire country rose 5.1% in the 12 months ended in July. That was up from 5% in June. Home prices are nearing their pre-crisis peak in 2006.
Also out Tuesday was the Conference Board's Consumer Confidence Index. It indicated that consumer confidence hit its highest level in nine years this month.
Silver investors and traders are also paying close attention to the Fed...
The U.S. Federal Reserve left interest rates unchanged at the September FOMC meeting. But policymakers said the case for a rate increase has strengthened. Market odds of a rate hike in December sit at 52%.
Yet even when the Fed raises rates, it will remain extremely accommodative. Plus, many economists argue that the only reason the Fed will raise rates is so that it can lower them.
The Fed's low-interest-rate policy is just one bullish factor for silver prices. Another is the increasing number of global central banks that have resorted to negative interest rates and other unconventional monetary measures.
Silver prices are up 37.41% year to date, and we see even more gains ahead.
Money Morning Resource Specialist Peter Krauth sees silver prices advancing by double digits before 2016 closes out. In fact, he sees the silver spot price hitting $22 by the end of the year. Get his full latest silver price prediction here...
- CME Group: FedWatch Tool
- Kitco: Live Prices
- Reuters: OPEC Agrees Modest Oil Output Curbs in First Deal Since 2008