However, some commodities market observers believe silver can rebound in the near-term. The rebounding U.S. dollar is hurting silver. The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), the tracking exchange traded fund for the U.S. Dollar Index, is one of the worst-performing currency exchange traded funds this year. UUP is lower by almost 8% year-to-date. Silver and other commodities are denominated in U.S. dollars, meaning weaker greenback is often supportive of upside for commodities prices. The dollar has recently traded slightly higher, weighing on some commodities.
Silver could get another boost if gold prices start rebounding in earnest. Indian demand is vital for gold because the country is the second-largest buyer of the yellow metal behind China. India, one of the world’s largest gold consumers, could be set to lower its import tax on bullion, which could be major catalyst for gold prices.
“If past is prologue, the silver ETF could be in for even rougher waters in the near term, should the Fed hike rates as expected today,” notes Schaeffer’s. “The central bank has lifted interest rates four times since 2015, and the SLV ETF has averaged near-term losses afterwards. Specifically, SLV was down an average of 1.38% a week after rate hikes, and down 0.14% one month later, per Schaeffer’s Senior Quantitative Analyst Rocky White. That’s compared to average anytime gains since 2015.”
For more information on the silver market, visit our silver category.