Silver (XAG) Forecast: Dollar Strength Pressures Silver—Will Support at $38.51 Hold?

Dollar Rebound Caps Precious Metals Rally

Silver prices fell for a third straight session on Friday, mirroring gold’s decline as renewed strength in the U.S. dollar and firm Treasury yields undercut demand for precious metals. Spot silver traded near $38.70, pressured by a stronger dollar and profit-taking, with traders eyeing key technical levels to determine the next directional move.

At 13:05 GMT, XAG/USD is trading $38.85, down $0.21 or -0.54%.

The U.S. Dollar Index (.DXY) rebounded 0.15% to 97.45, reducing the appeal of dollar-denominated commodities. Gold also declined, slipping below its 50-day moving average at $3341.10, a move that may accelerate downside momentum toward $3310.48 if buyers don’t step in. The same headwinds are now threatening silver’s uptrend.

Fed Policy Outlook Limits Upside for Non-Yielding Assets

Economic data continues to exceed expectations, reinforcing the Federal Reserve’s pause stance. Initial jobless claims hit a three-month low, while the flash composite PMI jumped to 54.6 — its highest in seven months. These figures support steady rate policy, reducing demand for non-yielding assets like gold and silver, especially as Treasury yields stabilize.

Yields on 10-year notes held at 4.416% and 2-year notes at 3.927%. With no immediate signs of a rate cut, silver bulls may need a fresh catalyst to reignite upward momentum. The “buy-the-dip” crowd is likely to wait near key levels such as $38.51 or $37.50, but selling pressure remains intact unless new support emerges.

Risk-On Sentiment Hurts Safe-Haven Demand

Signs of improving global trade relations — including a finalized U.S.-Japan deal and progress with the EU — have buoyed equities and weakened the case for defensive assets. Investors are rotating back into risk assets, further dragging down silver and gold. The shift in sentiment is particularly visible in the precious metals space, where profit-taking continues to outpace fresh buying.

Technical Levels Dictate Next Silver Move

Silver’s uptrend is vulnerable in the near term. A break below $38.51 could open the door to $37.50, the July 16 low. Failure to hold that support risks a trend reversal, with the 50-day moving average at $36.10 as the longer-term line in the sand. On the upside, bulls must reclaim $39.53 to restart the rally and aim for $40.00.

Short-Term Outlook: Silver at a Crossroads

Traders should brace for more downside unless silver holds $38.51. Momentum remains under pressure from a stronger dollar, steady yields, and fading safe-haven demand. Barring a volatility shock or dovish Fed surprise, silver looks set for consolidation or further retreat in the near term. Buyers may reenter near support, but conviction is lacking at current levels.

More Information in our Economic Calendar.