What is Happening to the Silver Price?

Silver prices appear to be continuing their downward trend, dropping sharply on August 21 from $19.25 per ounce to to $18.82 per ounce as of 2:07 p.m. EST on August 23, hitting an overall two week low.  
The significant drop Sunday night, however,  marked a seven-week low, with pressures of a stronger US dollar still hanging in the balance.
Keeping that in mind, the performance of the silver price is closely tied to its sister metal, gold, which has also dropped significantly to a low of $1,331.88. With both metals dropping, the gold-silver ratio has been pushed above 70 with continued rumours of the Federal Reserve raising the interest rates, according to the Bullion Desk.
However, many analysts remain hopeful that the white metal is still poised for a bull market and that it won’t have any troubles rebounding from the seven-week low.

Silver price forecast: still bullish

Looking at silver’s long-term outlook, analysts polled in FocusEconomics‘ August 2016 report project the silver price to drop to $18.30 per ounce by the fourth quarter of 2016, but rising steadily to $18.90 by the end of 2017. 
While the silver outlook as projected by analysts polled by FocusEconomics isn’t far off from where the white metal’s price currently is, keep in mind the silver price started 2016 at just $14.38 per ounce and has increased 34.09 percent overall, year-to-date.
Despite the year-to-date increase, Peter Krauth over at Money Morning project the silver price to cool down to $18 per ounce in the short term, though it won’t stay that way for long.
Krauth went on to say that he sees the silver price rising to $22 an ounce by the end of 2016, which isn’t far off from where it was post-Brexit. Back in July, the white metal sat around $21 an ounce–its highest level in roughly two years.

What’s driving the silver price?

As previously mentioned, reasons for the silver pricing cooling off have in part been driven by the US dollar making gains and continued rumours of the Federal Reserve raising interest rates this year, although it hasn’t officially been addressed as to when the rates should be raised.
According to the CME FedWatch tool, market participants are projecting only a 12 percent chance the rates will be raised by September while others don’t see the rates raising until March 2017.
Of course, interest rates and the US dollar aren’t the only things that impact the silver price, although they’re easily the most influential: the global economy, geopolitics, and monetary policy are all other contributing factors.
Money Morning further adds that the above, together with supply and demand, “are bullish for silver’s outlook.”
Bullion Desk reports that market participants are in agreement, noting the silver price is expected to “rise in the medium-term.”  James Steel, HSBC analyst told the publication that Brexit’s aftermath, China’s economy, global debt levels and interest rates are “just a couple of supportive factors.”

Investing in silver: a volatile market

The Investing News Network (INN) recently spoke with Todd Anthony, vice president of investor relations at First Majestic Silver (TSX:FR), said if investors are looking to get into the silver sector, one reason to consider silver over gold is that it’s very volatile market.  He said that if one is bullish on gold, “silver just makes sense.”
Another reason Anthony said investors should consider silver is the ratio.
“If you go back historically, the ratio between silver and gold is 15:1,” he said in our interview. “That was set for thousands of years and traded at that level until just the late 1800s/early 1900s when the financial markets really started playing around. That’s when the ratio started to increase.”
Anthony added that the ratio can’t stay the way it is in the long term, and projects to see 50:1 ratio by the end of the year.
“If you use $1,500 gold, that puts silver at $25-$30, potentially,” he said.
When it boils down to to it, the future outlook of the silver price remains bullish and investors will surely be interested to see how the white metal recovers from its recent seven-week low.
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