Silver prices have been surging in 2016 due to political concerns and uncertainty worldwide, including Brexit results and proposed policies from incoming US President Trump.

A weak US dollar also favored silver’s price that averaged $17.32/oz until November, which was 9.9 percent higher than the same period in 2015.

Silver hit its lowest price or $13.83/oz at the beginning of the year but then steadily increased until the end of July, reaching a high of $20.28/oz.  The silver market is expected to be in physical deficit for a fourth consecutive year in 2016 with a total annual shortfall of 52.2 Moz, the GFMS Silver Institute reports.

What to watch for in 2017

Looking forward to 2017, there are key factors to look at that will affect the price of silver throughout the year. By the end of 2016 the Federal Reserve interest rate may rise for a second time in a decade, influencing the US dollar demand. Political developments worldwide, in particular Trump’s implementation of policies, will have an impact on silver price as well as the forecast of a higher demand and a tight supply for the precious metal.

The Federal Reserve interest rate and the US dollar. Interest rates are forecast to go up in the US due to inflation expectations. After Trump’s election, Janet Yellen, the Federal Reserve chairwoman, said that interest rates could rise “relatively soon”.

Jim Paulsen, chief investment strategist at Wells Capital Management, told CNBC: “Everyone thinks the dollar’s going to go higher because the Fed’s going to raise rates. There have been five major rate hikes during recoveries by the Federal Reserve, and every one of them resulted in a lower dollar, not a higher dollar.”

Steen Jakobsen, investment chief at Saxo Bank, also said that historically the dollar often weakens after the US Federal Reserve raises rates as investors sell the currency after buying it in anticipation of higher rates.

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