Making Sense of Mixed Signals in the Price of Silver

Oftentimes in this space we’re focused on one particular variable—or maybe two—that’s sending a precious metal like silver in one specific direction. But right now, the signals in the silver market are hard to read. That leaves us with two questions: what are these signals (and their causes), and what are investors to make of them going forward? In order to do that, we’ll look at some of the frequent contributors to silver’s price—like the U.S. dollar index—as well as some newer faces.

Silver’s Price Related to the U.S. Dollar

The first thing most investors should do when considering the value of precious metals is to understand the current context of the U.S. dollar’s strength. You can do that by viewing MarketWatch’s page on the U.S. dollar index, or DXY.

Where is the dollar pointing? Recent headlines would have you see a recovery in the dollar index, but only just recently has the dollar shot down, almost a full point, before the mid-point of Thursday’s trading. Now you’re getting a sense of why there are mixed signals in silver: the U.S. dollar index appeared to be having a strong week after moving down in late Monday trading. Now, all of those gains have been wiped away, and then some. This is, of course, bullish for precious metals like silver, but the week isn’t over yet.

Silver Context Before the Dip

Economic Calendar points out that silver prices were declining today as investors “shifted their attention to central banks.” Given the recent activity, there’s a good probability that this kind of headline might be forgotten about. Pointing out that gold was down on the news as well, it’s worth noting that gold has taken a slight “up” position since then, echoing what’s going on in the silver markets.

It’s fair to say that Thursday morning’s stock market results were “mixed,” as well, with most of the major indexes—the Dow, S&P, etc.—were within a few tenths of a percentage point of their original trading value when the day began.

Where the Mixed Signals Point

If silver was supposed to be headed down today, there have been some developments that suggest the precious metal might have more legs—but try not to read too much into this kind of development.

There are a lot of mixed signals with silver, true, but that’s only on a week-to-week—even a day-to-day basis. If we were to zoom out and look at silver’s performance in July or June, we’d have a much better view of where the precious metal may be heading, and which factors really add up when it comes to the price of the precious metal.

That means investors will want to be wary about thinking there’s a ton of good news to be read in a slight bump like this morning’s. Silver might be slightly volatile as precious metals go, but it remains an intriguing long-term investment, and it’s difficult to make money on it in the short-term future, especially when the market is sending mixed signals.