Could Silver Rally?

Cassie Bastien

5/17/2017 10:01:40 AM

Daily Gold & Silver Market Report – 05/17/2017

As any investor should know, Precious Metal prices and the dollar typically move in opposite directions. When the U.S. dollar/South African rand exchange rate (ZAR) moves up, spot Silver prices tend to move down and vice versa. Due to the nature of this relationship, SilverSeek.com Reporter Hubert Moolman says, “The USD/ZAR chart is often a leading indicator for a Silver bottom as well as a Silver rally.” Why do these two correlate? Well, the answer is they both relate to interest rates. Moolman says, “Both the South African Rand and the Silver price are depressed by lower interest rates. ... When interest rates are low, then the market is putting a low value on the South African Rand and Silver. Interestingly enough, South Africa has just recently been downgraded to junk status” with the rand near all-time lows. After reviewing many charts and statistics, Moolman believes, “we are soon likely to have a massive Silver rally,” similar to that of 2010 and 2011.

Dollar Falls With Worries Surrounding Trump

MarketWatch.com Reporters Victor Reklaitis and Ryan Vlastelica noted, “The dollar fell against its major rivals Wednesday, extending its recent weakness amid escalating U.S. political concerns following a report that President Donald Trump tried to influence an FBI probe into links between his inner circle and Russia.” Elsa Lignos, global head of foreign-exchange strategy at RBC Capital Markets, said in a note that the dollar “is trading badly on all Trump-negative news, though there is arguably a limit to how far that can run.” Lignos added European political risk has actually dissipated, while U.S. political risk is rising.

• The ICE Dollar Index declined 0.2 percent to 98.05, down from 98.11 late Tuesday and touching levels last seen November 9, the day after Election Day. 
• Over the past month, the index has dropped nearly 2.4 percent. Conversely, the yen has surged 3 percent against the dollar (MarketWatch.com).

What Does A Rising Euro Mean for Gold Prices?

On Tuesday, the euro surged above $1.10, its highest since November of 2016, according to Investing.com Contributor Arkadiusz Sieron, but what does this mean for Gold prices? Sieron explained, “The upswing in the EUR/USD exchange rate was partially caused by weakness in the U.S. currency,” caused by problems within the U.S. Furthermore, Sieron says “the market odds of a June [Federal Reserve interest] rate hike decreased from 73.8 percent to 69.2 percent.” As the price of Gold is negatively correlated with the dollar’s strength, a stronger euro against the U.S. dollar should be bullish for the Precious Metals market.

At 11:01 a.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,262.60 Up $23.60
• Silver, $17.12 Up $0.28
• Platinum, $950.40 Up $10.90
• Palladium, $787.40 Down $8.70

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