Could Silver Bounce Back?

The price of silver declined in the past month. Will silver bounce back in the coming weeks? Let’s examine the recent news that may affect silver (SLV).

The drop in silver price has also reflected in the decline in demand for leading precious metals’ ETF including iShares Silver Trust. During December, the Silver Trust’s silver price declined by 2.8%. The recent FOMC meeting may have partly affected the direction of silver price. Let’s take a closer look at this subject.

FOMC’s monetary policy

The FOMC’s decision to taper QE3 from $80 billion to $75 billion a month of long-term asset purchases has pressured down the price of silver. But has QE3 positively affected the price of silver vin the past year?

As you can see, the ongoing rise in the U.S money base, mostly due to the asset purchase program, didn’t pull up the price of silver. In previous years, however, the price of silver sharply rose along with the U.S money base. The concerns over the devaluation of the U.S dollar and the potential rise in inflation may have contributed to the rally of silver as a safe haven investment. But the U.S dollar remained strong against several leading currencies and the inflation low.

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