Silver Prices and the Fed

This Will Push Silver Higher

Written by Daniella Nicole
Posted December 5, 2013 at 5:11PM

Precious metals like silver have a long history of ups and downs, and the ongoing drama over Fed will-they-or-won't-they tapering has only added to that. Meanwhile, the Fed keeps playing games by making vague statements regarding what it is going to do and when, which keeps the market in its current state.

silver coins stacksMeanwhile, the Fed continues to pouring $85 billion of our tax dollars not even into the economy, but largely into the reserves of banks each month, which is pushing us closer and closer to a bubble that – when it bursts – will put us in even worse shape.

Despite the insistence of the current administration and its lapdogs that the economy is doing so much better via a lot of hot air and fudged numbers, the real numbers eventually come out, and the Fed keeps using the fact we aren't really doing as well as advertised to keep up the QE3 program.

All of this leaves people in a panic. The fear is that tapering will hurt us and reverse this great recovery we are supposedly having, while the truth is the sooner tapering starts, the better.

History has shown us that the economy has an interesting way of eventually righting itself, and we have seen some of those same patterns occur throughout the current economic downturn, despite and regardless of government intervention. If the government gets out of the way, this will do us all a lot of good.

Yellen as Fed Chair

Though she has not been officially confirmed yet, it is a given that the Senate will indeed give Janet Yellen the Fed chair job to replace Ben Bernanke. The Senate has tended to put through all of Obama's other nominees – even highly controversial ones – so it very unlikely that will change.

Even though Republicans tout themselves as the “small government” party, their track record says otherwise, including the fact that as of about two weeks ago, according to Bloomberg, Yellen had the support of at least five Senate Republicans. Those five are Tom Coburn (OK), Orrin Hatch (UT), Bob Corker (TN), Susan Collins (ME), and Lindsay Graham (SC).

History has shown us that even those who speak against Obama's nominees usually end up putting them through anyway, so even though the Democrat-heavy Senate won't need full Republican support, it will likely have enough to confirm Yellen. Only 60 votes are needed, and with all the Dems (55) and those five Republicans, she will have them.

Yellen will then take over Ben Bernanke's job, and our economic future will rest in her big-government, pro-stimulus/government-intervention, pro-money-printing hands. Buckle up folks, it's gonna be a bumpy ride. Bernanke may turn out to be quite the fiscal conservative in comparison to Yellen.

The Future of Silver

What all of this means for precious metals like silver is first dependent upon how much longer the tapering drama goes on and what Yellen does once she takes the reins.

Right now, fear that the Fed will start tapering sooner rather than later has pushed silver even lower. In fact, according to, silver futures have hit an almost 5-month low.

But the quantitative easing program involves the purchase of bonds, and Yellen is all for that. According to Bloomberg, silver rose with 30-year bonds on the fact she has publicly stated she wants to continue stimulus “until the economy improves.”

Hey, if they keep pumping money in and grow a nice big bubble that then bursts, the 'need' for government help will be ongoing, right? See how that works?

What This Means for Investors

How soon do people fear the Fed will begin tapering? By spring – likely announced at one of the next several meetings.

How often does the Fed – or more specifically, the Federal Open Market Committee (the monetary policy-making part of the Fed) – meet? The FOMC meets about eight times yearly, though it can meet more often if need be. This means we can expect a meeting and announcement from them regarding the latest on what they will be doing about once every six to seven weeks. This is good to know when tracking the market, as stocks are impacted by speculation and Fed meetings/announcements.

If the Fed does announce tapering, which is unlikely any time soon, silver will likely drop – at least temporarily – and all the speculative fear that the tapering announcement is forthcoming has the same affect.

However, once the news breaks that tapering isn't occurring yet, silver rallies, and this is what we should see at the next meeting, when once again we are told tapering will happen eventually, but not yet.

What this means for you and I is that while silver prices are low, it's a great time to invest. At some point, silver will rally, and as they say, “Buy low, sell high.”


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