Why the Price of Silver Today Just Hit a May 2017 High

The price of silver today (Monday, May 22) is up 1.5% and trading at $17.05. According to data from FactSet, that puts the metal on track for its highest close since April 28.

After a nasty 13.2% drop in silver prices from April 17 to May 9, last week had us wondering if the silver correction had run its course.

We now have our answer, at least in the near term.

Silver has bounced back in a strong way following the low of $16.07 on May 9. Since then, it's up a big 6.3% to today's silver price.

The recent rebound has led some investors to say silver is back in bull mode and heading higher from here. But given the still-bullish position held by silver speculators, there's no guarantee that silver has completely finished correcting in the near term.

Recent Commitment of Traders (COT) data shows that speculators' long positions have indeed pulled back, with non-reportable positions falling by 706 to 29,040 from May 9 to May 16. However, they still remain high and can't be seen as a contrarian signal, at least not quite yet.

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But remember that this is just my near-term outlook. I still strongly believe that silver prices will post a big double-digit gain by the end of December 2017.

With that in mind, let's look at silver's big "recovery week" last week. Then, I'll share with you my bullish price target for silver this year.

Price of Silver Today Continues Last Week's 2.5% Rebound

After settling at $16.44 on Friday, May 12, silver opened much higher on Monday, May 15, near $16.70. Despite some weakness throughout the day, the metal managed to close at $16.60 for a solid 1% gain on the day.

Tuesday's action was much more orderly. Silver prices opened higher again at $16.72 on the back of a steadily weakening U.S. Dollar Index (DXY). They moved sideways until the early afternoon, then rocketed higher to $16.83 by the close. That marked a 1.4% rise from the previous close.

Here's a look at the DXY over last week...

price of silver today

"The recent rebound has caused analysts and investors to say silver is back in bull mode and heading higher from here. But given the still-bullish position held by silver speculators, it's no guarantee that silver has completely finished correcting in the near term."

Wednesday morning brought a bit of weakness as the dollar bounced, but silver still pulled off another daily gain. As the Dow Jones fell 1.8% for its biggest sell-off since last September, silver should've seen a bigger rally due to its safe-haven appeal. However, it only settled 0.2% higher at $16.86.

The metal opened lower on Thursday, May 18, at $16.70. It sold off throughout the day as the Dow Jones recovered from the previous session's decline. The price of silver fell 1.8% to close at $16.55.

But the silver price made a strong comeback on Friday as the dollar fell toward the 97 level. It opened at $16.81 and closed at $16.83 for a 1.7% daily gain. With that, silver posted a weekly rise of 2.5%.

The price of silver today is continuing last week's rebound. It's currently up 1.5% to $17.05 - the highest level of the month so far.

After becoming quite oversold, it was hardly surprising to see silver prices bounce back. The rally was admittedly stronger than I had expected, but I did say last week that we should look for a bounce.

However, the short-term picture indicates we could see more silver price declines. But that will eventually lead into a long-term rally by the end of 2017.

Here's where I see silver prices heading the rest of the year...

My Bullish Outlook on Silver Prices in 2017

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Looking at the near term, we may continue to see some weakness due to what I think contributed to the 13.2% drop from mid-April to early May: Noble Group's financial meltdown.

Noble Group Ltd., which is Asia's largest commodity trader, is reportedly on the verge of filing for bankruptcy. In early May, Noble Group bonds lost nearly half their value essentially overnight. One likely reason for this is because Noble started selling silver in a big way to boost its liquidity position. This likely caused overall bearish sentiment in the silver market.

However, its effect is sure to be limited in time, and considering the recent silver price rebound, this may have already run its course.

If this Noble Group scenario is behind us and silver keeps rebounding, I'd expect it to run into resistance at its 50-day or 200-day moving averages near $17.44 and $17.76. These are indicated by the blue and red lines in the chart below...

silver price in 2017

But seasonal data and the latest COT report point to possible renewed weakness at some point before silver heads higher in a sustained way. FactSet data shows that the price of silver has posted average monthly losses of 2.3% and 1.5% in May and June over the last 10 years. And, as we pointed out above, non-reportable long positions on silver fell by 706 last week.

Still, silver's fundamental long-term picture is very bullish. I expect it to rally to the $22 mark by the end of 2017. That would represent a 29% gain from today's silver price of $17.05.

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