Silver has been a very interesting commodity to watch throughout the year 2016. After massive gains in the first half, however, we’ve started to see declines, and they are continuing today. Nonetheless, September is going to be a big month for the global economy, and that will likely play a major role in the price of silver. Today, we’ll talk about why economic releases will likely be the driving factor in price movements in the month ahead, what releases you should be watching for, and what we can expect to see moving forward.
Why Economic Releases Will Likely Drive Silver’s Price Up Or Down In The Month Ahead
If we look at silver throughout the year, one fact becomes overwhelmingly clear. Poor economic and market conditions early in 2016 were the driving factor with regard to the price growth we’ve seen in the precious metal. However, economic conditions seem to be changing, and safe-haven demand is starting to fall off. Many investors aren’t sure what to expect and are looking to economic data in order to find some answers.
After all, in many ways, silver is a safe-haven investment. This means that when economic and market conditions are positive, we can expect declines in demand and price. Adversely, when economic and market conditions are negative, we can expect see gains. Another major factor in the month ahead is the USD.
Because silver is priced using the USD, the two assets have an incredible inverse relationship. However, the month ahead is likely to bring news for the USD. With recent economic improvements in the United States, investors are expecting that the Federal Reserve will raise the federal funds rate. If the central bank decides to do so, they will essentially be adding value to the USD. Because silver is priced using the USD, this will make the precious metal more expensive around the world, leading to declines in demand due to accessibility issues. As a result, the price of the commodity could fall hard.
Economic Stories That Silver Investors Should Be Watching
As mentioned above, there are several big economic stories around the world at the moment, and, really, if you plan on investing in silver or own the precious metal, you should be watching them all. Nonetheless, there are some stories that will likely cause much more movement than others. They include:
- Federal Reserve – Watch the Federal Reserve closely. At the moment, the majority believe that strengthening in the job market, housing market, and consumer spending will lead to a rate hike. Janet Yellen also hinted that chances of a rate hike are higher due to an improved economic outlook. The FOMC meeting for the month will be happening on the 20th and 21st. So, the big movement will happen around this time. However, any economic developments leading up to this meeting will likely lead to big movements in the price of silver. Remember, positive developments pertaining to the US economy will likely lead to declines in silver while negative developments will likely lead to gains.
- ECB – Another big story to watch here is the European Central Bank. Following the Brexit, the bank has taken little action in an attempt to improve conditions in the region. However, with mounting pressure from consumers and investors as well as the looming shadow of the Bank of England stimulus package, many believe that the ECB will unleash its own stimulus efforts. The ECB meeting will take place on the 8th. If further stimulus is put into place, it could add more resistance on silver, as investors will have yet another reason to ditch safe havens.
- Asian Economy – Recently, we’ve seen sluggish reports out of China, and Japan continues to work to improve economic conditions in the country. Both of these economies are incredibly important to the global picture. As a result, these are also going to be incredibly important stories to watch.
What I’m Expecting To See
All in all, I do believe that silver has more room to grow in the long run. However, in the short term, conditions seem to be improving on an economic front, and the market is starting to head back upward as well. As a result, I’m expecting to see more declines throughout the month of September. Nonetheless, keep in mind that new monetary policies that are stimulating economic movement are highly experimental. Therefore, safe-haven demand isn’t likely to completely dissipate, helping to slow downward trends and find support for future price growth.
What Do You Think?
Where do you think the price of silver is headed? Join the discussion at TalkTRENDZ!
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