Silver prices fall sharply as interest rates rise to a two-year high.
“Silver’s been in the doldrums for years, but it would be hard to think of a worse time for the metal than this,” said one trader on account of Wednesday’s interest rate decision. “I guess we’re going to find out how much conviction there is among the bears. The only reason they’ve held out so long is because of inflation worries.” The Federal Reserve raised bank rates by 0.25 percent and signaled that they will increase them in months ahead if economic conditions warrant it. It was the second straight increase after a seven-year spell without any. The rate increase is negative for silver prices because it means that the opportunity cost of holding precious metals rises. So investors will run to assets like bonds and stocks that can beat inflation over time. The Federal Reserve’s decision is also a victory for the bulls because it means that economic conditions are strong enough to warrant further rate cuts in the near future. This should also reduce inflationary pressures in the economy and become a tailwind for gold. However, in our opinion, even with continued rate cuts in coming months and years, gold will still be difficult to hold too long if inflation is on track. There are too many fundamental uncertainties that could hit its price hard if nothing else does.
Silver price prediction
It is difficult to predict the price of silver tomorrow. The market will be strongly influenced by news from Japan, as that nation’s central bank is expected to meet soon and may issue a statement. However, if the Bank of Japan does nothing, then there are several possible scenarios for silver. It could go sideways for a few days or even bounce a little higher before falling back a bit. Or it could go in the opposite direction and rally sharply as investors take advantage of this opportunity to buy low. The high end of the risk/reward curve is that silver prices rises 3-5 percent tomorrow. Next week will likely be very important for silver prices. One of the biggest silver mining companies, Barrick Gold Corp.
Why did the price of silver fall so rapidly?
Silver didn’t rise for a long time, so a lot of people bought it hoping to profit from any price increase. This led to an imbalance in the market with supply and demand being out of balance. Because traders were holding metal and not selling it, the price just kept falling until they couldn’t afford to sell at the low prices anymore. Then prices dropped sharply as people tried to buy cheap metal before prices rose again and before other traders could get back in at lower prices and make money for themselves. The price of silver fell because there was more buying than selling.
Will the price of silver go up tomorrow?
Silver is a volatile commodity, so it will be hard to predict its price in the short-term. In general, prices should rise again as investors get back in on the deal. There are several scenarios for overnight and next week. Silver could go sideways for a few days or even bounce a little higher before falling back a bit. Or it could go in the opposite direction and rally sharply as investors take advantage of this opportunity to buy low. The high end of the risk/reward curve is that silver prices rises 3-5 percent tomorrow. We’ll have to wait and see.
In this interview 3 weeks ago I predicted for 2021: #Bitcoin $220,000
Gold $3,000
>>> Silver $100“Max Keiser Reveals Bitcoin, Gold and Silver Price Forecast for 2021, After Nailing 2020 Call”
👉 https://t.co/Kv21m4ISAx pic.twitter.com/18M2T6UsoX
— Max💙🇸🇻 (@maxkeiser) January 30, 2021
What can cause silver prices to rise more than they are now?
There are many factors that can affect the price of silver, but it is impossible to predict them all. Silver’s price is tied in some way to the economy, but unlike gold its relationship is indirect. Gold prices usually rise when the economy turns down or inflation increases, and fall when the economy improves or inflation falls. Silver prices are also affected by monetary policy and economic growth, but its price change isn’t as predictable as gold. There could be a close correlation between silver prices and economic activity in Japan, which is the second-largest consumer of silver after the United States.
