Gold: $1,293.41 9.24
Silver: $17.17 0.12
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October 29th Mid-Week Market Update
Article By: Kyle Wanchalk on October 29th, 2014

Silver prices are quiet in early trade today as investors await this afternoon’s FOMC announcement. It is expected that the Fed will end its QE program. Investors will be looking for further guidance as to the timing of the first rate hike by the Fed. Currently, those in the hawkish camp feel the first hike will come in March of next year while the dovish camp feels the first hike will come in September of next year.

The Fed’s language will be closely scrutinized today as some of their common statements have seemingly taken on a life of their own. In addition to the Fed’s guidance on interest rates, investors will also be listening for the Fed’s comments on economic activity.

The question then becomes will any of what the Fed does or says today really affect silver? The answer is probably not unless there is some drastic departure from current policy. The fact is that the economy continues to show signs of improvement. Things are getting better, albeit at a slower rate than hoped for. While silver is often looked at as a safe haven asset the fact is that improving economy activity could potentially be the metal’s saving grace. Silver has far more uses in industry than its gold counterpart, and as the economy picks up, demand for silver could potentially rise.

Demand for silver could pick up dramatically in the coming years. According to a recent report by The Silver Institute, demand for the metal could potentially increase by 1 billion ounces in various investment vehicles over the next decade.  The institute cited increasing demand and inquiries regarding investments in the metal whether it be in coins, bars, mining companies or other forms. Although many investors do not know or understand all of silver’s potential uses, it seems that perhaps more are beginning to see the potential upside in the metal for its versatility.

Silver prices have been trending down for some time and the bears remain in firm control of the market. Silver prices may even fall further before finding a long-term bottom. A test of the $15 per ounce level in silver is certainly not out of the question in the coming weeks and months. It would seem, however, that more and more investors are willing to be very patient with the metal because they see potential long-term value in holding it.

Silver prices for now will likely continue to take their cues from stocks, the dollar and geopolitical activity. It seems, however, that prices are reaching a very attractive level for the long-term investor and that interest and demand in the metal will likely continue to increase as economic activity improves.