Silver Prices Should Be Higher Because Inflation Concerns Are Overblown

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Silver Prices Are Falling Because of Erroneous Inflation Concerns 

Everything in the markets points to higher prices for precious metals. Yet, they’re failing to respond as expected. The situation is not desperate. In fact, gold and silver prices have gone up in the past three months. It’s just that at a time when stock market volatility has reached such high levels and inflation concerns are rising, you expect the price of gold and the price of silver to rise.

The problem, especially in the case of silver prices, is the following. While the markets remain in casino mode, the higher inflation has everyone thinking more optimistically about the U.S. dollar. Inflation, goes the logic, will push the Federal Reserve to raise interest rates, pushing the dollar higher.

Admittedly, the argument makes sense. There’s logic to that. But, on closer inspection, there’s no reason the U.S. dollar should expect to achieve any major gains compared to other currencies (and Bitcoin is not one of these). But, perhaps overly optimistic or pessimistic—it’s hard to tell these days—inflation could reach higher levels than expected. This has left silver vulnerable to a lack of curiosity.

Silver Price Chart

Chart courtesy of StockCharts.com

The greenback appears more profitable, thereby attracting the attention of more traders. Moreover, because silver prices—as all other commodities from gold to oil—are priced in dollars, silver becomes less attractive to foreign buyers. Higher interest translates to a higher dollar value. Buyers from abroad using other currencies, whether euros or Chinese yen, have to pay more for every ounce of silver.

Silver also has some technical applications. It’s used in circuits, coupled with other materials to become a superconductor. It has no substitute. Demand for such products remains high.

The Inflation Concerns Are Bunk