Silver Spot Price Is Correcting – Get Ready for the Rebound
As I’ve been warning for some time, the silver spot price was due to correct. And that’s playing out this week.
Recent silver spot price action has dragged the precious metal below its narrow consolidation range and below its 50-day moving average. That certainly helps confirm correction mode.
But I’ve also been telling readers to watch for the gold/silver ratio to bounce back after dropping significantly in silver’s favor. That’s happening now, too, and we’ll look at that in more detail below.
Price of SilverNow that U.S. Federal Reserve Chair Janet Yellen and other Fed officials have made their speeches at Jackson Hole, Wyo., we can see what that has done to the dollar and precious metals.
Her remarks that the U.S. economy is nearing the Fed’s employment and inflation goals sent the dollar higher and precious metals lower.
It seems the market saw Yellen’s remarks as hawkish, which explains both the stronger U.S. Dollar Index and lower silver prices.
We’re going to look at what the silver spot price correction and the gold/silver ratio move could mean for silver going forward. But first let’s analyze what happened with silver prices last week…
Why the Silver Spot Price Is Correcting Now
Like gold, the silver spot price peaked in early August around $20.70. But the precious metal eventually succumbed to weakening sentiment and overbought conditions. And that trend intensified this past week.
On Monday, silver opened at $18.88, and after a quiet day of trading closed just one cent higher at $18.89.
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Tuesday saw silver open at $19.00 on early morning dollar weakness. But the dollar rebounded and that weighed on silver, which closed at $18.85.
Wednesday, more strength in the dollar continued to drive the silver spot price lower. Silver began trading at $18.84 but quickly dropped to $18.55 by 11 a.m. It closed even lower at $18.50.
By Thursday, these new lower levels had become entrenched. Silver opened at $18.50 and closed at that exact same price.
But after Yellen’s speech on Friday is when the fireworks started. Here’s how silver prices reacted:
You can see an immediate drop as Yellen’s comments were made, then a strong bounce, followed by a retreat to below pre-speech levels.
Much of that can be explained by the opposing reaction in the U.S. Dollar Index. Here’s how it looked: