Silver (XAG) Forecast: Ceasefire Spike Fades—Bull Trap or More Accumulation?

Silver Surges 5% Then Gives Most of It Back

Spot Silver had a wild session on Wednesday. The metal spiked more than 5% to $77.65 on the ceasefire news then handed most of it back, settling at $74.07, up $1.23 or +1.54%. That kind of price action tells you exactly how nervous this market is right now.

Ceasefire Was the Spark but the Fuel Ran Out Fast

The ceasefire between the U.S. and Iran hit the tape and silver moved immediately. Fears about Hormuz eased, the war premium started bleeding out of energy markets and that took pressure off inflation expectations and Treasury yields. Silver caught a bid on all of it at once.

The dollar dropped at the same time and that brought in foreign buyers. Rate cut expectations started creeping back in as energy prices pulled back. Silver’s industrial angle helped it outperform gold. Traders rotating into assets that benefit from better economic conditions found silver before they found gold. Short covering piled on and pushed the spike higher than the fundamentals warranted.

That’s the problem. The driver was relief, not a real change in the underlying picture. The market figured that out by the close.

Direction Depends on Whether the Ceasefire Holds

I wouldn’t read too much into today’s move. Silver spiked, faded and settled with a modest gain. That’s not a bullish reversal. That’s a market that reacted to a headline and then thought better of it. The two weeks will tell us everything. Ceasefire holds and the dollar stays soft, silver has a chance to build on this. Ceasefire falls apart and we’re right back where we started.

Technical Outlook

Technically, the main trend is down according to the main swing chart and the 50-day moving average. However, the minor trend is up and so is momentum.

Wednesday’s rally fell short of the 50-day moving average at $80.01 today. Overtaking this level with conviction will signal the presence of strong buyers.

Near term resistance is the 61.8% retracement level at $74.63. Prices spiked over this level on Wednesday, but could not hold those gains. Now the market is below this level. If buyers can break out again and hold this level then enough momentum could build to challenge the major 50% level at $83.60.

The new short-term range is $61.00 to $77.65. Its retracement zone at $69.32 to $67.36 is potential support. New buyers could come in on the next test of this area, hoping to form a potentially bullish secondary higher bottom.

If this zone fails as support, prices could plunge back to the major support cluster at $61.00 to $59.34, which includes the 200-day moving average at $59.62.

While the wide retracement zone at $74.63 to $83.61 is considered the main resistance area, inside this zone sits the 50-day moving average at $80.01. Some traders are looking at this indicator as the true trigger point for an acceleration to the upside. It all depends on how you look at it and the price action and order flow when it is tested.

More Information in our Economic Calendar.