Here's What's Next for Silver Prices in 2018 After Last Week's Volatility
Peter KrauthSilver prices in 2018 weren't immune from the stock market's turbulence last week. But silver prices held up better than stocks, and the brief downturn makes this an excellent silver buying opportunity…
As the stock sell-off gained intensity, silver eventually followed the rest of the market. It's a reminder that silver is not gold, and investors would be wise not to ignore its legendary volatility.
Nonetheless, silver held up better than the S&P 500 did over the last five trading days.
While the stock market benchmark gave back 4.1%, silver lost only about 3.3%.
It's impossible to know whether this market correction is over. I expect to see stocks consolidate and trend sideways with higher volatility in the short term.
In fact, one indicator in particular says now may be the best time to buy the precious metal…
At the same time, the U.S. dollar has bounced back, and its recent rally is likely to continue.
For silver, the current market correction could be a minor headwind that will tame any gains in the very near term. But look for the silver price rally to return soon.
Silver Prices in 2018 Are Trending Upward
While silver prices dipped last week along with the stock market, they are clearly trending upward in 2018.
Both stocks and the U.S. Dollar Index (DXY) were stagnant on Tuesday (Feb. 6). The DXY hovered around 90 for most of the day. Silver sold down in early morning trading, opened at $16.67, and closed slightly lower, at $16.62
On Wednesday (Feb. 7), stocks fell again while the dollar rallied. The DXY worked its way up to 89.87 by 8:00 a.m., hitting 90.35 at 10:00a.m., where it spent most of the rest of the day. Silver opened at $16.59, then dropped in the face of a stronger dollar to close the day at $16.34
Thursday's (Feb. 8) stomach-churning 1,000-point decline in the Dow was accompanied by a dollar that moved sideways with a downward bias. The DXY spent most of the day around 90.25, while silver managed to gain. The precious metal opened at $16.29, then rose to $16.41 by 9:00 a.m., where it spent most of the day, finally closing at $16.39.
You can see the relative stability of the dollar compared to the S&P 500 in the charts below. The dollar gained and held its value as the stock market grew volatile.
And you can see just how quickly stocks fell in the S&P 500 during the same time period…
Friday (Feb. 9) brought a little more strength to the dollar, which hovered around 90.45 for the majority of the day. Stocks bounced back, as traders established new positions throughout the day.
The S&P 500 closed higher while silver, which opened at $16.32, followed a similar pattern. However, silver only closed a penny higher, at $16.33.
On Monday (Feb. 12), silver opened near $16.40 but then jumped on dollar weakness to reach $16.55 by 2:00 p.m. The DXY reached 90.40 just after 8:00 a.m. but by the early afternoon was back at 90.20, supporting a bounce in silver to $16.54.
But the silver price slide is actually a buying opportunity, since I see silver prices heading higher from here.
And I'm looking at one indicator that shows just when it's going to happen…