After a relentless rise for the silver price in 2017, we’re finally seeing the metal start to correct.
Silver has soared from $15.75 on Dec. 23, 2016, to $17.87 today (Monday, March 6). That’s meant a big 13.5% gain in just over two months, including a small pause in late January.
This kind of winning streak can’t continue unabated, and we’re currently seeing a second, stronger correction for the price of silver.
Rising inflation expectations, and data confirming those expectations, have underpinned the silver price rally. Trump’s recent speech to Congress, which boosted stocks and the U.S. dollar, have also been bearish for silver prices.
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Now, the markets are pricing in a March rate hike by the Fed. That’s also caused the dollar to rally and the silver price to fall.
But the Trump stock market rally and surging dollar won’t affect the long-term silver price in 2017. That’s why I’m going to share with you my bullish 2017 silver price forecast.
First, here’s why silver prices declined last week…
Why the Price of Silver Saw a Huge Correction Last Week
Silver prices began the last trading week mirroring gold prices pretty closely. But as the week progressed, silver quickly declined and underperformed gold.
On Monday, Feb. 27, the silver price opened at $18.34 and fell to $18.20 by the afternoon. Interestingly, this happened along with a weakening dollar, which is not typical. From there, silver regained a little strength to close at $18.24 – down 0.9% from the Friday, Feb. 24, close of $18.41.
Tuesday was a near exact repeat of Monday, except silver opened lower at $18.27. Buyers took over and quickly ran it up to $18.41 by late morning, then sellers got the upper hand and dragged the price of silver 0.7% lower to close at $18.29.
The action in silver and the dollar on Wednesday was dominated by Trump’s speech to Congress the night before. The speech lit a fire under the dollar and caused the Dow Jones Industrial Average to surpass 21,000 for the first time ever. While that certainly diverted investor interest away from silver and into stocks, the silver price still managed to post a daily gain. It settled 0.5% higher at $18.39.
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On Thursday, March 2, silver prices had their biggest one-day drop of the year. They opened at a healthy $18.30 but eventually caved to selling pressure as the dollar surged above 102.
Here’s a look at the dollar’s big rally last week…
From there, silver prices took a sharp plunge. By early afternoon, they had dropped from $18.31 to $17.71 – an ugly 3.3% loss in just two hours. The price of silver eventually closed at $17.75 for a 3.5% loss on the day.
Friday’s price action provided no relief. Silver opened at $17.68 and quickly tested lower levels but bounced back to about the $17.70 level. It eventually reached $17.74 by the close, logging a 0.1% loss on the day but a 3.6% loss for the week.
Again, these weekly short-term losses won’t factor into silver’s long-term rally. That’s because we’ve identified two momentum indicators that show silver prices rising 24% by the end of the year.
Here’s our silver price forecast for 2017…
Silver Price in 2017 Will Hit These Bullish Price Targets
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I see the price of silver reaching $19 sometime next quarter and $22 by the end of 2017. And the white metal will rally despite being outperformed this past week by its cousin – the yellow metal.
You see, silver prices and gold prices are frequently compared to each other since both move based on the same factors, including the dollar and stock market.
Here’s a look at the two metals’ performances last week…
For a metal that normally leverages both upward and downward movements in gold, it’s notable how the silver price remained remarkably stable right up until Thursday morning. Before then, silver was flat on the week, while gold was down 1.5%.
But Thursday morning was when sellers dominated silver prices and dumped the metal wholesale. Within just two hours, silver had lost 3.5%, while gold had fallen only 2.15% by early Friday afternoon.
So, what should we expect now from silver?
Last week, I told you silver could hit about $18.50 before its momentum would run out. In the following chart, we can see that’s exactly what happened…
This chart shows the two most important silver price indicators – the relative strength index (RSI) at the top of the chart and the moving average convergence divergence (MACD) at the bottom. The RSI measures the silver market’s oversold conditions, while the MACD simply measures the strength of price movements.
As you can see, silver’s RSI and MACD momentum indicators have rolled over with silver’s recent drop. The RSI’s sharp decline to 48.60 – combined with the MACD’s surge to 0.28 – indicate that silver’s correction isn’t over.
We could see silver prices fall down to between $16.50 and $17.20 over the next few weeks before resuming their rally.
And I figure the next leg up can take silver to $19, but it may only manage that within Q2. Beyond that, $22 looks attainable in the ensuing quarters.
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