The price of silver has dropped 1.5% since last Friday's close of $17.19, putting it on track for its first weekly loss in five weeks.
This week's dip came after the price of silver posted a 0.9% gain on Monday. From Tuesday through Thursday, prices dropped 1.9% to close on Thursday at a two-week low of $16.85. The silver price today (Friday, Jan. 27) is up 1.7% to $17.14, but it's still on track to break its weekly winning streak that started on the week ended Dec. 23, 2016.
But we're confident that silver prices can run 40% higher by the end of the second quarter. And there's one country that will be largely responsible for that bull run.
First, here's why the silver price has retreated this week...
Why the Price of Silver Is Down Today
The biggest reason why the price of silver is down this week is the soaring Dow Jones Industrial Average.
On Wednesday, Jan. 25, the Dow Jones crossed 20,000 for the first time in its 132-year history. Investors had been waiting for the index to reach that psychologically important mark since Jan. 6, when it came within one point. As of today, the Dow Jones is up 1.6% to 20,083 in 2017.
Don't Miss: Double Your Money in 2017 with These Six Stocks
Silver prices typically fall during stock market rallies. That's because rising stock prices lower the demand of long-term safe-haven investments like silver. When broad market indexes like the Dow Jones are soaring, investors are more inclined to put their money there because it makes it seem like everybody is making money.
Even with headwinds from the stock market, our forecast sees the price of silver rising this year. The metal will benefit from rising inflation, a falling gold/silver ratio, and declining short selling in the silver market.
But demand for physical silver will ultimately be the fundamental force that pushes prices higher. And there's one country in Asia that's proving to be one of the most dominant silver price influencers in the world.
Here's more on this country - and why its demand reinforces our bullish silver price prediction...
This Country's Demand Will Push the Price of Silver 40% Higher by Q2
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
The country is India, and it's poised to be a huge influence on the silver price in 2017.
India is the world's biggest importer of physical silver. Silver and gold magazine Coin World reported India's 2015 silver imports hit 340 million ounces. That surged past the United States, which imported 193 million ounces in 2015.
Although India is expected to stay the world's biggest silver importer this year, imports could be even higher if the country's government approves a controversial new policy...
To battle the country's corruption, Indian Prime Minister Narendra Modi pulled the 500- and 1,000-rupee notes out of circulation. These were India's two most common currency denominations. When Modi made them invalid, roughly 86% of all cash in the country became worthless. This caused banks across the country to face cash shortages.
But the decision also sent local gold prices in the country soaring to $2,800. That's because gold demand spiked as Indian citizens raced to convert their cash into gold before the two rupee notes became worthless. Money Morning Resource Specialist Peter Krauth says this high gold demand could persuade Modi to make a new law limiting gold ownership.
If the law passes, silver will be the only other metal worth owning. And Krauth - a 20-year veteran of the metals market - says this could push the global price of silver to $24 per ounce by the end of Q2 2017. That would be a gain of 40% from today's silver price of $17.14.
"Rumors that the Indian government will restrict the amount of gold individuals can own, which will only push the metal-buying public - hundreds and hundreds of millions of people - into silver," Krauth said on Jan. 12.
Urgent: A door has opened for an ultra-rare but powerful anomaly in the stock market... It involves a precious metal, one that's considered exceedingly more rare than gold. Get all the details.
Follow me on Twitter: @AlexMcGuire92
Like Money Morning on Facebook.