Why Is The Silver Price Falling? Is This The Time To Buy Silver?

iStock/Olivier Le Moal

What Caused the Price of Silver to Fall?

It seemed like silver had found an easy route toward the $18.00-per-ounce, or even $20.00-per-ounce, mark. Instead, its latest price has fallen to a range between $16.17 and $16.52 per ounce. Silver is following gold, which has also given up some of the gains it made since the start of 2018. So what has caused the price of silver to fall?

When discussing prices in a speculative context, such as precious metals or equities, nothing is certain. Still, the overall market is sending a rare signal of clarity. The Dow Jones index has given up about 12%. That means the stock market is in full correction mode. That would normally imply silver (and gold) to move higher. The key is the “normally” part, because there’s nothing normal about the market now. Much of the 2017 and January 2018 bull fever was driven by the tax cuts.

Why the Silver Price is Going Down

At first, stocks rose on the expectations of tax cuts. Since late December, when Congress signed the reform into law on December 19, they rose on expectations of higher corporate earnings.  It was a veritable orgy of optimism. Some companies announced employee bonuses, while others announced bigger investments, and investors responded in kind.

The tax cuts were to stocks what an afterburner is to a jet engine. Yet those very tax cuts are the very reason stocks and precious metals are dropping. Many analysts and investors expect the Federal Reserve to lift interest rates at a faster and more significant pace than anyone expected to counter inflation. Ironically, the January jobs report and the 200,000 jobs that the economy added, is the trigger for inflation. In fact, the Fed has been muted on the topic, making no mention of lifting rates. However, it has not intervened to dismiss interest rate fears, adding more fuel to the fire–and the fear.

The higher interest rates will likely increase the U.S. dollar’s value compared to other major currencies (the dollar index). And typically, a rising dollar weakens silver and other precious metals. Will the silver silver price continue to fall? In fact, the better question might be: is it a good time to buy silver?