Silver Price Forecast: How does the Latest News from the Fed Bode for Silver?

October 26, 2017

silver bars

Anyone who follows precious metals regularly knows that one of the most important factors in the price of precious metals is the strength of the U.S. dollar. Since these metals are denominated in U.S. dollars, a stronger dollar means that it takes fewer of them to buy up an ounce of silver—which in turn lowers the price of the precious metal. And who has say over the strength of the dollar? There are more than a few economic factors there. Perhaps the most important: the U.S. Federal Reserve. To understand the future prospects of silver, we’ll look at the future of the Fed in an uncertain 2017.

President Trump Mulling the Future Head of the Fed

The Federal Reserve chairperson might just be the second most powerful person in the country, and right now, there’s some uncertainty over who the next one will be. When Lou Dobbs of Fox Business Network recently interviewed President Donald Trump, the two talked about the subject. Trump even went so far as to ask Dobbs if he had any preferences for the job, which was a joking way of suggesting that the position is still up in the air.

This means uncertainty for silver. If the chairperson of the Federal Reserve for the future is still unknown, then so is the Federal Reserve’s potential policies. If a Federal Reserve chairperson believes that the U.S. economy needs high interest rates, that could potentially go poorly for the precious metal—not to mention other precious metals like gold.

A report from Bloomberg did suggest that Trump has ruled out Gary Cohn, National Economic Council Director, for the position. This narrows the list—but not by much.

Reuters: Stock Market “in Trump’s Hands”

How important is this pick? The President’s choice puts the stock market “in [his] hands” according to Reuters. Pointing out—quite rightly—that the free flow of cheap money since the Great Recession has pushed up stock prices for a while, Reuters pointed to speculation that the President might want to keep this bull market moving, which in turn would suggest a Federal Reserve chairperson happy with the status quo. As of recent years, that’s been somewhat “stable” for precious metals, with only occasional spikes and dips making the news.

Expecting the Unexpected

What silver enthusiasts need to know about forecasting the future of the metal is that there are headlines which may interrupt these usual patterns. While it’s possible to speculate about the President’s choice of Federal Reserve chair, there may be headlines and unforeseen circumstances that either shape the choice itself, or shape the events which the choice will then have to deal with. For the latter portion of 2017, it might not be surprising to see silver in roughly its current shape--$17 per troy ounce. Those who see long-term increases in silver should have plenty of time to get in before the next rise. But headlines are never certain—nor is the next choice for the leader of the U.S. Federal Reserve.  

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Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.

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