Is the Price of Silver Going Up After Last Week's 0.3% Gain?

The price of silver has been flat lately, but that could change as the Fed considers its next monetary decision...

Silver prices mimicked gold's price action pretty closely last week, trading in a tight range between $17.05 and $16.96. From Friday, Aug. 18, to Friday, Aug. 25, silver climbed just 0.3% to close at the high end of that range at $17.05.

With the U.S. Dollar Index (DXY) falling and gold prices staying flat, silver was unable to demonstrate much growth. Over the Aug. 18-25 period, the DXY tumbled 91 basis points from 93.43 to 92.52, while gold saw a small 0.5% gain from $1,292 to $1,298.

But as I mentioned in my gold update last week, the fast-approaching debt ceiling deadline on Sept. 29 could boost silver prices in 2017.

If the government can't raise the ceiling before then, the United States' AAA credit rating could be downgraded - a move which has historically led to stock market declines. When S&P downgraded the U.S. credit rating in August 2011, the Dow fell 2.7% over the following month. Another sell-off would spur silver buying as investors move into precious metals as a hedge.

But right now, the focus is mainly on the Fed and whether or not there's another rate hike on the table in 2017. That - combined with stronger technical indicators for silver right now - reinforce my bullish silver price targets for the rest of the year.

Before I get into those, here's a recap of silver's movement last week...

Price of Silver Rises 0.3% Last Week (Aug. 18 - Aug. 25)

After settling at $17 on Friday, Aug. 18, the silver price opened higher at $17.04 on Monday, Aug. 21. It peaked at 10 a.m. before steadily pulling back to $17.01 by the close. That marked a small 0.06% gain from Friday's settlement.

Tuesday was similar in action, and that was despite the DXY bouncing from 93.09 to 93.55.  Silver prices moved up to $17.06 shortly after the open but reversed course throughout the day to settle 0.2% lower at $16.98.

Look for the X: This mysterious "X" pattern predicts which stocks are going up - with 100% certainty. Some have gained as much as 225% in 15 days and 264% in less than a month. Learn more...

But the metal rallied on Wednesday as the dollar fell 30 basis points from 93.50 to 93.20. Prices opened higher at $17.04 and, despite falling back below $17 in the morning, clawed their way higher through the afternoon. The price of silver closed the day at $17.05 for a 0.4% gain.

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

price of silver

Despite the dollar moving mostly sideways on Thursday, silver prices gave back all of the previous session's gains. They opened near $16.88 at the open and moved higher throughout the session to close at $16.96. Despite that, prices still logged a 0.5% decline on the day.

On Friday, Aug. 25, the price of silver popped to $17.12 at the open. It fell back to trade near the $17 mark as Yellen's speech at the Jackson Hole symposium sidestepped comments on the U.S. economy's health and monetary policy. By late afternoon, silver had climbed back higher to close the day at $17.05 for a 0.5% rise. That marked a weekly gain of 0.3%.

But the silver price today (Monday, Aug. 28) is up 0.8% and trading at $17.18. This jump comes on the back of the falling DXY, which is down from 92.52 to 92.32 today.

With silver steadily gaining momentum over the last week, I think it still has more room to run higher as we move into the last four months of 2017. This will largely depend on a potential FOMC rate hike this year and continued strength in silver's technical indicators.

Here's why both could have a positive impact on the silver price this year...

My Bullish Targets for the Price of Silver in 2017

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

As I mentioned, silver's price action was muted, just like gold's performance last week. It also traded in a narrow range, except silver's was even narrower between $17.05 and $16.96, and was atypical for the normally more volatile metal.

But then came Yellen's highly anticipated speech on Friday...

Around 9:30 a.m. before the speech, Dallas Fed President Robert Kaplan said the central bank could afford to be patient with raising interest rates despite its need to shrink the balance sheet.  Some are saying that caused both gold and silver prices to jump, but they quickly reversed based on Yellen's speech.

Here's how that looked before and after Yellen's 10 a.m. address...

silver price in 2017

Despite that volatility, some experts seem to think silver will head generally higher as market volatility looms...

In a recent interview with Kitco News, TD Securities Global Head of Commodity Strategy Bart Melek made his case for higher silver. Melek thinks stock markets are due for a bout of serious volatility. And typically, more volatility is beneficial to precious metals as investors buy them as hedges against their stock losses.

In my view, silver should confidently maintain above $17 before heading higher. The only caveat is the DXY, which could still bounce and weigh on silver. But any bounce in the dollar will likely be short term.

If we look at silver prices since July 7, we can see how they've rebounded a strong 11.8%...

silver price

I expect the silver price to next reach $17.75 and eventually $18.50 in the next couple months. Beyond that, we could certainly see $20.50 sometime this fall.

Meanwhile, the silver price to silver stocks ratio has rallied over the last week after dropping through the month of August. Both the relative strength (RSI) and moving average convergence divergence (MACD) - two of the most important silver momentum indicators - also confirm the rally and have room to move even higher...

silver prices

That suggests to me that silver stocks have ended their weakness and started gaining strength faster than silver itself. When the stocks lead the metal, it's often a bullish sign for both.

And that should make this market pretty exciting moving forward in 2017.

Up Next: The Gains Keep Coming

Keith Fitz-Gerald has a strategy for his High-Velocity Profits subscribers that sets them up for twice the profit potential of the "average" investor.

Subscribers who have been following along with his recommendations are racking up wins at a dizzying pace.

Nine gains in one week alone... 30 triple-digit gains this year... 46 triple-digit wins in the last 12 months...

Profits like that can be life-changing. Learn all about High-Velocity Profits here - and get in position for the next winner now.

Follow Money Morning on Facebook, Twitter, and LinkedIn.