Using Gold to Track the Direction of Silver’s Price

June 7, 2017

June has opened well for precious metals, as stocks have been shaky relative to the hedge investments. But where might silver end up, and where does that fall in relation to gold? As of this morning, precious metals are slipping slightly as the Dow Jones Industrial Average has ticked up two-tenths of a percentage point, which suggests some resistance for gold as well as silver at this point. But the psychological barrier precious metals face right now is in gold, not silver, suggesting that even silver’s price has to bear the burden of gold’s psychological wall at $1,300.

Silver’s Performance in Early June

Before we get to wondering about silver’s price, let’s take a moment to recall the events of the past week. Silver was in the low $17 per troy ounce range to start the month of June, and has since improved to hit the upper portion of that same range. That puts it in prime position to make a charge for $18 per troy ounce if there is ever another reason for hedge investing in a single day—or, silver can simply mosey its way north as it has since late May.

On June 1st and 2nd, the main news in silver was that precious metals had slipped a bit with U.S. economic data looking positive. That optimism has since petered out of the markets a bit, which has been reflected in both the Dow Jones Industrial Average movement and in the prices of precious metals.

Silver and Gold United Again?

Because DailyFX sees an important line-in-the-sand for gold prices, it’s not hard to wonder why silver, which is traditionally tied to the success of precious metals to some extent, might also be facing those same critical points in its own price.

But it’s important not to get too caught up in the weekly or even monthly workings of silver’s ties to gold. The gold price to silver price ratio tends to hold on to a consistent number over longer trend-lines. At any given time, there may be some “slack” on this proverbial line that gives silver room to grow relative to gold, or vice versa.

What to Watch for as the Week Develops

With recent precious metal reaction to troublesome headlines overseas in regards to terrorism and a less-than-certain economic climate, this week’s U.S. economic numbers will be important, including:

  • Thursday: weekly jobless claims
  • Friday: Wholesale inventories
  • Next Tuesday: NFIB small business index
  • Next Wednesday: Consumer prices and retail sales numbers

On any given week, these individual events might not have major impacts unless something very out of the ordinary is reported. Even so, investors will want to watch these numbers get released to get an idea of where the economy may be heading, particularly as we wait on the U.S. Federal Reserve to make an upcoming decision on interest rates. As is always the case with silver, there is plenty of room for upward movement if the economic weather is right—but the weather is always hard to predict.

US silver mining began on a large scale with the discovery of the Comstock Lode in Nevada in 1858.

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