Silver (XAG) Forecast: Breakout or Breakdown? $41.04 Will Decide the Move

Silver Eyes Breakout as Traders Weigh Fed Policy and Inflation Print

Silver prices are trading just below key technical levels Wednesday, holding within a narrow range but showing signs of upward pressure. After stalling near a 14-year high at $41.67, the market is coiled, awaiting catalysts that could drive a breakout—or a breakdown. Traders remain squarely focused on Federal Reserve rate cut prospects and upcoming U.S. inflation data, both of which will determine short-term positioning in precious metals.

At 12:44 GMT, XAG/USD is trading $41.12, up $0.25 or +0.61%.

Fed Rate Cut Bets Provide Tailwind for Precious Metals

Expectations for a September rate cut are driving interest across the metals complex. CME Group’s FedWatch Tool now places a 92% probability on a 25-basis-point cut. This comes after last week’s weaker-than-expected nonfarm payrolls and a significant downward revision of 911,000 jobs to year-long employment figures. A softening U.S. labor market, combined with a cooling dollar, is reinforcing investor appetite for metals with no yield, such as gold and silver.

While gold has already tested all-time highs near $3674.70, silver is consolidating just beneath a breakout zone. The bullish narrative remains intact as long as the Fed maintains a dovish tone and real yields remain under pressure.

Technical Focus: $41.12 Is the Line in the Sand

Silver’s immediate price range is defined by $40.40 to $41.67, with the midpoint at $41.04 acting as the pivot. A sustained move above $41.04 would indicate the presence of active buyers and open the door for a retest of $41.67. Clearing that level with volume could trigger momentum buying, targeting $44.22 next.

Conversely, a break below $40.40 could put sellers in control, exposing silver to key support levels at $39.88, $39.31, and $38.94. The critical level to watch remains the 50-day moving average at $38.50, where major trend support is expected to emerge.

Inflation Data Could Be the Decider

While Wednesday’s Producer Price Index (PPI) is expected to hold steady at 3.3% year-over-year, Thursday’s Consumer Price Index (CPI) report is the bigger trigger. Any surprise to the upside in CPI could slow down rate-cut speculation, tempering metals rallies in the short term. Until then, the market remains on edge, with traders largely favoring a “buy-the-dip” approach.

Silver Forecast: Bullish Above Support, Breakout Still in Play

Silver remains technically constructive as long as it stays above $40.40 and especially the 50-day moving average at $38.50. Traders should watch $41.04 closely—this level will likely dictate the next directional move. With dovish Fed expectations, a weaker dollar, and bullish gold flows, silver appears poised for a fresh breakout if buyers step up above resistance.

More Information in our Economic Calendar.