Precious Metals

Silver Investing

The silver price fell following the Fed rate hike, but at least one expert believes that the metal will strengthen by the end of the year.

The US Federal Reserve announced a quarter-point increase in the benchmark interest rate on Wednesday (June 14), raising it to 1 to 1.25 percent.
The S&P/TSX Composite Index (INDEXTSI:OSPTX), S&P/TSX Venture Composite Index (INDEXTSI:JX) and S&P 500 (INDEXSP:.INX) were down by the end of the trading day, though the Dow Jones Industrial Average (INDEXDJX:.DJI) gained 0.22 percent.
While the silver price weakened in the days ahead of this week’s Federal Open Market Committee meeting, silver was trading slightly higher Wednesday morning. It hit $17.20 per ounce before the Fed announced plans to hike rates, then fell to $16.90 as the market responded to the news. Silver has weakened by 80 cents since June 4, according to data provided by BullionVault

Peter Krauth, resource specialist for Money Map Press, predicts that the rate hike will help silver reach $22 by the end of 2017, and has noted that the last two interest rate increases have been bullish for the precious metal. Historically, the silver price and interest rates have moved together in the long term.

Another rate hike expected in 2017

Wednesday’s rate hike is the third increase in six months, although the Fed left rates unchanged after its last meeting in May. Fed Chair Janet Yellen said during a press conference that the move “reflects the progress the economy has made and is expected to make toward maximum employment and price stability.”
Unemployment in the US reached a 16-year low of 4.3 percent in May. The unemployment rate has decreased by 0.5 percent since January, according to statistics from the US Department of Labor.
However, consumer price data indicates that inflation is moving away from the Fed’s 2 percent target — consumer price inflation receded to 1.7 percent in May, when it was expected to advance to 1.9 percent. In a statement, the central bank said it is “monitoring inflation developments closely.” One more Fed rate hike is planned for this year, but the Fed has not indicated when it will be happening.
US President Donald Trump is also expected to fill three vacancies on the Fed board, which could alter the central bank’s rate setting policy. Yellen is the first woman to lead the Fed, but her term ends in February 2018.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.


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