Despite muted action in silver over the past week, the precious metal continues to form a solid base. In fact, silver prices today (Tuesday) are already up 1.3% in morning trading.
There were, nonetheless, two main market-related events last week that were extremely relevant for silver prices.
The first was comments from the new Federal Reserve Chair Jerome Powell that, along with an improving economy, we may also be getting a faster pace of rate hikes.
Markets didn't like that, but the dollar jumped and pushed silver back.
But in the second half of the week, silver got some of its mojo again and recuperated.
On Thursday, U.S. President Donald Trump said tariffs would be coming to both foreign steel and aluminum. So the renewed risk of trade wars weighed on the dollar, which this time supported silver, shooting it up nearly 2% from its low of the day.
Silver prices in 2018 could continue to face headwinds over the next several weeks, as seasonal tendencies suggest. But I expect the dollar to return to its bearish trend soon, potentially helping push silver up and out of its narrowing trading range.
Before we get into my silver price forecast for 2018, here's how silver prices today are trending...
Here's How Silver Prices Today Are Trending
Silver opened on Tuesday, Feb. 27, nearly flat from the previous close near $16.60. But weakness quickly set in, and the precious metal began to sell off, thanks to Powell. It dropped down to $16.30 as the U.S. Dollar Index (DXY) popped. Then, the DXY rose from a base, near 89.80, to touch 90.48 just before 11:00 a.m. The dollar would settle back a bit, but silver only managed to recover slightly, to close at $16.38.
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On Wednesday, silver's fortunes looked only slightly better. Despite the DXY pushing higher to average about 90.65 in the late afternoon, silver peaked at $16.45 by 1:00 p.m., then sold off a bit to close the day at $16.39.
But the real action came back on Thursday, as we began the month of March. There was a further push higher in the DXY, all the way to 90.91 by 10:20 a.m., weighing silver down to $16.18 around that same time. But Trump's tariff promises panicked stock investors and reversed the dollar's fortunes. The DXY reversed to 90.25 by 5:00 p.m., as silver shot higher, to reach $16.46 by 5:00 p.m.
Here are the DXY and S&P 500 over the past week.
Friday would see silver digest its gains from the previous day. The DXY settled further back, dropping down to hover around 90 most of the day. That helped silver consolidate higher, opening at $16.40 and rising to $16.49 by the 5 p.m. weekly close.
On Monday, March 5, traders sold off the metal a bit even as the dollar held its own, with the DXY hovering mostly above 90, around 90.05. Silver opened at $16.42 in New York trading and closed just barely higher, at $16.43.
Now that we've seen how silver prices today are trending, here's where I see the price of silver heading from here...
Here's Where Silver Prices Are Headed Next
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In my view, the dollar's going to return to its bear market that began at the start of 2017.
The DXY just made a second attempt at a sustained rally past 90.5, and that also failed. The DXY is forming a descending triangle; a bearish chart pattern.
When we get a break below lower support, odds are good that downward momentum will increase. And lower support is at 88.5; not far from the current 90 level.
But meanwhile, another descending triangle is taking shape. And this one is in the gold-to-silver ratio.
We can clearly see the descending triangle narrowing. I expect the ratio to break below 80, possibly boosted by a weaker dollar at the same time.
When that happens, silver is likely to shoot higher.
The first target will be around $17.60. But I think when the next big silver rally is sparked, the metal could run quickly higher past $18.50.
Beyond that, I still think we could see $20.50 in the second half of this year, and perhaps even $22 before we cross into 2019.
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