Over the last week and a half, we've seen the U.S. dollar fall from 97.42 to 95.99 and the 10-Year Treasury yield rise from 2.14% to 2.37%. With those numbers, it's little surprise that the silver price has been volatile.
In fact, the price of silver is down 3.7% since Monday, June 26, to $15.96 today (Thursday, June 6). That means prices were still hovering at the year-to-date lows when they closed 1.3% lower at $15.84 yesterday.
The gradual decline started when silver prices saw a 1.3% flash crash in tandem with gold's quick 1% drop, then climbed into mid-week, only to give it all back at the close of the month.
With this short-term perspective in mind, it would be easy to think the price of silver isn't making progress.
But to a trained eye, silver's short- and medium-term price action is looking constructive.
Despite silver being down 6.9% since the June 14 U.S. Federal Reserve rate hike, it could be putting in a final capitulation sell-off, a big indicator that everyone who plans to sell their silver has already done so. In my view, silver's experiencing a bullish consolidation as it builds momentum for a move higher.
With that in mind, I expect silver prices to climb as much as 37.8% through the rest of 2017.
Before I show you why, here's a closer look at silver's price movement since June 26...
Silver Price Falls 3.7% Over the Last Nine Sessions (June 26 - July 6)
Following very closely in gold's footsteps, silver experienced the same flash crash as gold did on Monday, June 26. Between 3 a.m. and 5 a.m., the price of silver plunged 1.3% from $16.68 to $16.46. It managed to climb back a bit to close the day at $16.58 for a 0.4% loss from the previous session (Friday, June 23).
On Tuesday, June 27, the U.S. Dollar Index (DXY) tumbled over 80 basis points from 97.35 to 96.50. That helped lift silver to a $16.62 open. Despite reaching an intraday high of $16.72, silver prices settled at $16.63 for a 0.3% gain.
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On Wednesday, June 28, silver opened at $16.81, then dropped to $16.71 as the DXY experienced a minor spike. Silver prices ultimately settled 0.9% higher at $16.78 by the end of the session.
If you look at this chart here, you'll see how volatile the DXY was that Wednesday...
But the price of silver saw volatility again on Thursday, June 29, despite a continued sell-off of the dollar. Other than a small rally to bump up against resistance at 96, the DXY spent the day trending downwards. Meanwhile, silver saw a 1.1% sell-off from the previous $16.78 close to $16.59 by the end of the day.
On Friday, June 30, a relief rally in the DXY from 95.50 to 95.70 didn't stop silver from edging higher throughout the day. Silver closed at $16.61 for a 0.1% gain on the day, a 0.2% loss on the week and 4.8% loss for the month of June.
The metal kicked off the month of July with a big plunge. On Monday, July 3, the price of silver tumbled a huge 3% on the day to close at $16.11. This came as the DXY pushed higher, from around 95.75 to 96.20 - a 45-basis point gain in just one day.
While the U.S. stock market was closed for the Fourth of July on Tuesday, silver was trading and continued its trend lower. It declined 0.4% to close the session at $16.05.
The biggest silver price movement happened yesterday (Wednesday, July 5) as the metal fell through the psychologically important $16 level for the first time this year. It dropped 1.3% to close at $15.84 - the lowest since silver's $15.99 close on Dec. 30, 2016.
And despite a slight rebound in the silver price today (Thursday, July 6), it's still hovering at its lowest levels of the year. The metal is up 0.8% today to $15.96.
So, with all of this volatility over the last week and a half, what is it about silver's recent action that justifies my bold 37.8% predicted price gain?
Here are the technical factors that I see pushing silver prices higher in 2017...
This Is Why Silver Prices Could Rally 37.8% to $22 This Year
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If we look at the metal's movement on July 3 specifically, we can see how it tested a level that indicates a big bounce higher.
The price action that day was distinct because silver fell 3% to $16.16, testing the previous low on May 9. Since its early June correction, silver appears to be bottoming around $16. Keep in mind that the December low was around $15.90, and we are currently testing that with today's $15.96 level...
The large drop on July 3 has the hallmarks of a capitulation sell-off, which indicates that mostly everyone who has wanted to sell has already sold by now. That means silver prices should be set up to bounce higher. The RSI and MACD momentum indicators may both be putting in lows now as well, setting the stage for a new bottom, then a rally.
And if we look at the above chart, we see there's a lot of congestion around the $16 level. Over the last two years, this has acted as both resistance and support several times.
Another bullish price factor in silver's favor is the gold/silver ratio...
As the gold price bottomed on Nov. 27, 2015, and the silver price bottomed on Dec. 14, 2015, those lows brought about a peak in the gold/silver ratio by February 2016...
Despite this gold/silver ratio rising again after bottoming last July near 66, we may have just hit a triple top around 76 with the recent correction in gold punishing silver even further. This is typically a bullish indicator for silver prices.
If silver bottoms here near the $16 level and the DXY tops out soon, I'll be looking for silver to regain the 50-day moving average near $16.80 - up 5.3% from today's silver price of $15.96. After that, the next target should be the 200-day moving average of $17.40 - up 9% from today's price.
And by the end of 2017, I expect silver to reach as high as $22 per ounce. That would be a stunning return of 37.8% from the current price.
The Bottom Line: Overall, silver prices have been on a big losing streak lately. Although they're down right now to the lowest levels of 2017, I could see the metal gaining 37.8% to $22 by the end of Q4 2017. That's because its recent decline is characteristic of a capitulation sell-off and has also caused movement in the gold/silver ratio that's in favor of silver.
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