The biggest silver price news today (Friday, May 5) is the metal's continued decline to its lowest level of 2017.
The price of silver today is down 0.3% and trading at $16.25. According to FactSet data, that's the lowest level for an active silver futures contract since prices closed at $15.99 on Dec. 30, 2016. Today's drop comes after two consecutive sessions of fresh 2017 lows.
Here's why the white metal is in free fall this week - and why it represents one of the best buying opportunities of 2017...
The Big Silver Price News Dragging Down the Metal This Week
Silver prices are on track for a big 5.9% loss this week thanks to the Fed's statements after its May FOMC meeting.
At the end of its two-day meeting on Wednesday, the U.S. Federal Reserve announced it would leave interest rates unchanged at the current 0.75% to 1% range. The bank surprised analysts when it referred to the weak economic growth last quarter as "transitory," a strange choice of words that was considered dismissive. After all, Q1 GDP growth came in at only 0.7% -- the worst in three years.
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These statements show the Fed still intends to hike rates multiple times this year. Safe-haven metals like silver responded on Wednesday by falling to record lows. The silver price dropped 1.7% to settle at $16.55 - the lowest since closing at the same price on Jan. 4.
The possibility of additional rate hikes also boosted the dollar to its highest level since April 21, which was the biggest weight on the price of silver. A rising dollar makes dollar-denominated commodities like silver more expensive to users of other currencies. That ultimately reduces demand and drives prices lower.
But this week's sharp drop is just a short-term reaction to the rate hike chatter. In fact, it's a common misconception that silver prices can't rally in high interest rate environments like the one we're entering now. After all, rising interest rates have a bullish effect on the dollar, which is fundamentally bearish for silver.
However, we've just uncovered proof that shows higher rates don't always suppress the silver market. On the contrary, high interest rates can actually boost silver prices over the long term, making today a great time to buy silver since it currently trades at a discount.
Here's why silver won't be weighed down by interest rates over the long term...
[CHART] Silver Prices Could Still Rally 35.4% in 2017 Despite High Rates
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To debunk the myth that silver and interest rates can't rise together, all you have to do is look 40 years into the past.
As you'll see in this chart, the 1970s were an impressive decade of climbing interest rates and climbing silver prices...
Throughout most of that decade, the federal funds rate - considered the benchmark interest rate of the United States - was above 5%. That's far above the 0.75% to 1% rate we have following the last March 15 rate hike. Even more shocking was how interest rates peaked above 15% by 1979 right as the early-1980s recession was starting to take shape.
The price of silver gradually soared over the long term in the face of record-high rates. The metal climbed from about just $1.91 per ounce in January 1970 to $35.28 per ounce by January 1980 (unadjusted for inflation).
Clearly, the entire decade invalidates the idea that interest rates and silver prices can't simultaneously run higher.
And history may be repeating itself as we're starting to see a long-term trend of rising silver prices and rising interest rates. Since Dec. 16, 2015, the Fed has hiked rates three separate times. Meanwhile, the silver price has climbed 14% to $16.25 since then.
That strong gain indicates silver is poised for a long-term rally this year, regardless of how many rate hikes there are. Any stock market pullbacks in response to rate increases will also be catalysts for the price of silver this year.
Money Morning Resource Specialist Peter Krauth is also very bullish on silver prices in 2017. He expects them to rise 35.4% to $22 by the end of the year.
That makes now the perfect time to pile into silver before it rebounds from current lows.
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Alex McGuire is an associate editor for Money Morning. Follow him on Twitter.