uploads///Front Month Silver Futures  Month Price Evolution

What Global Factors Are Affecting Silver?


Jun. 8 2016, Published 5:04 p.m. ET

Global implications

Besides understanding the supply-demand scenario in precious metals, it’s also crucial to look at what other global factors have an impact on precious metals. The fluctuations in silver also come from gold’s movement. Gold is dependent on other economic events like the rate-hike scenario in the US, US dollar fluctuations, and overall financial market performance.

Silver surged ~30% during the first few months of the year. However, the increased fear that the Federal Reserve will hike the interest rate pushed the precious metals lower, as they are non-interest bearers. Higher interest rates often make gold lose its appeal and cause a plunge in prices.

As the above chart shows, silver prices dropped significantly in May as investors feared that a higher interest rate in the US would cause investors to jump to Treasuries and abandon precious metals like gold and silver.

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Silver funds

Rate hike fears also impacted the funds that depend on silver for their directional move. Funds like the Global X Silver Miners Funds (SIL) and the PowerShares DB Silver Fund (ZSL) suffered from the fall in silver. However, they still have maintained their year-to-date gains. These two funds rose 4.3% and 12%, respectively, on a 30-day trailing basis.

Metals Focus forecasts that silver prices will be at $17 per ounce for the last three months of 2016. This forecast is likely based on the assumption that negative interest rate policies around the world could buoy precious metals.


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