Silver Price Forecast: Will Precious Metals Benefit from Tax Reform?

December 20, 2017

silver bars

Late last night, the U.S. Senate was busy voting on a bill that could finally get approved by Congress and officially ignite the tax reform that’s been talked about so long on Capitol Hill. With tax reform comes the possibility that many Americans will see more of their own paychecks coming home to them—which, in some circles, is a positive sign that 2018’s markets will have another banner year. But how will tax reform affect silver prices, or precious metals as a whole?

The Effects of Tax Reform

Let’s start first with the basic effects of tax reform on the economy as a whole. MarketWatch put together a list of five effects, which include the fact that holding on to stocks now in favor of selling after the new year (and new taxes kick in) to take advantage of lower rates. That means that if a crash or correction is coming around the corner, it may still take until at least the New Year before we see a mass exodus of cash moving out of the markets.

That movement means that there are “smart players,” argues MarketWatch, who are counting on this phenomenon and believe that 2018 may be the time to sell. If that happens, these investors are looking to get in on the sales before the market takes a true dip. That could mean that any pessimism in the market is also more sensitive, as some with a lot invested might simply be waiting to capitalize on the new rates and the knowledge that others are doing the same.

The Impact on Silver and Precious Metals

If it’s true that clever investors are watching for a 2018 dip as people take advantage of the recent stock gains by selling during a period of lower taxes, it could spell a potential move away from stocks as a whole. The question then becomes: where does that money go?

Some investors might keep it as cash within their brokerage account, simply looking for a prime entry point to get back in. But others might see a need for a long-term hedge. That increased demand could influence the prices of silver and gold, which in turn will drive them up as the stock market falls.

But that’s not the only element responsible for the prices of precious metals. With the Federal Reserve expected to raise interest rates again next year—perhaps multiple times—there will be downward pressure on metals as the strength of the dollar increases.

Short-Term Recovery for Silver

After silver appeared ready to crater as of late—at least going into mid-December—it’s showing a little more Christmas cheer right now, moving back above $16 per troy ounce from lows in the $15 range. Though silver still has a while to go to recover to its 30-day highs, it’s possible that December will keep at this approximate range. It might represent an opportunity to get into precious metals before investors start taking gains early next year, which could be an advantage to any investor looking to stay ahead of major movements.

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.

The word ‘silver’ originates from the Old English Anglo-Saxon word 'seolfor'