The silver price crossed the $18-per-ounce mark for the first time since April on Thursday (September 7).
As of 10:30 a.m. EST that day, the white metal was chancing hands at $18.06, a level not seen in five months. Silver rose as high as $18.10 on Thursday, and as of 3:48 p.m. EST it was sitting at $18.05. Year-to-date it is up about 15 percent.
Silver’s price rally has been driven by many of the same factors that are pushing the gold price higher. Key among those drivers are geopolitical tensions caused by the US and North Korea and weakness in the US dollar.
“North Korea’s two weapons tests — the Aug. 28 missile test that crossed Japan and the Sept. 3 hydrogen bomb test — have stoked fear among investors,” says Money Morning’s Peter Krauth in an article published Wednesday (September 6). “The Dow Jones is down 0.7% since last Friday, as worried investors have pulled out of the market and poured into precious metals.”
Safe-haven metals like gold and silver become increasingly appealing to investors during times of financial and political uncertainty. Unlike assets that bear credit risk, the value of these metals tends to stay the same or increase during times tumultuous times, offering protection for investors.
US dollar weakness has also been a prevailing theme in recent weeks. Most recently, the ICE US Dollar Index was off 0.7 percent on Thursday at 91.673 points. When the US dollar is weaker, gold priced in US dollars becomes more appealing to investors using other currencies.
As mentioned, the gold price has risen in tandem with the silver price. The yellow metal reached $1,300 per ounce at the end of August, and since then has been able to stay above that level. Some experts believe that it could reach $1,400 by the end of the year — the Bank of America Merrill Lynch made that call last week, and since then other market watchers have come forward with similar predictions.
Others remain more cautious. While Standard Chartered (LSE:STAN) “maintain[s] a positive view on gold,” Suki Cooper, the firm’s precious metals analyst, said in a recent note, “gold prices are scaling September 2016 highs, [but] they have not been accompanied by broad investor demand and the physical market remains soft, making the rally susceptible to short-term corrections.”
In terms of what’s next for silver, opinions are similarly mixed. Firms polled recently by FocusEconomics gave a wide range of predictions on how silver will fare in Q4, with Macquarie coming in with the highest prediction at $20.50, and Capital Economics giving the lowest at $15.80. The consensus Q4 forecast from all the firms consulted is $17.30.
That said, there does seem to be some agreement that a correction could precede further gains. Similar to Cooper, Krauth suggests, “I see [silver] heading much higher by the end of the year, even if it sees a bit of weakness in the next month or so.”
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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