Silver (XAG) Forecast: Flat Silver Market Awaits Catalyst from War, Oil, Yields

Silver Struggles to Shift Momentum as Rate Outlook Keeps a Lid on Prices

Spot Silver futures are edging higher on Tuesday, underpinned by a dip in Treasury yields and the U.S. dollar. The trend is down, but traders are trying to shift momentum to the upside by overcoming a key 61.8% level at $74.63.

Technical Outlook

Overtaking $74.63 will signal the presence of buyers. If this creates enough upside momentum for Spot Silver, we could see a surge into the 50-day moving average at $81.63, followed by a major 50% level at $83.61. This is a potential trigger point for an acceleration to the upside.

If buyers can’t overcome $74.63 then prices could retreat into a short-term 50% level at $78.71. If new buyers don’t show up here then prices could collapse into the support cluster formed by the main bottom at $61.00, the long-term 50% level at $60.835 and the 200-day moving average at $59.24. This is the major area that has to hold. Otherwise, the market will turn bearish.

May Comex Silver futures are also in a downtrend. The trigger point for an upside breakout is $77.23. Overtaking this level could launch a near-term surge into the 50-day moving average at $82.30. But the major breakout level is the 50% price at $85.91.

There is room to the downside if buyers give up on overtaking $77.23. Prices could collapse into the March bottom at $61.21, followed by the 200-day moving average at $59.30.

War Isn’t the Driver. Rates Are

Fundamentally, traders are waiting for the next catalyst that will drive prices through support or resistance. Some think it’s the war that will do it. They’re locked in on the geopolitical scenario. They believe that since there is a war going on, silver should be going up as if it were a poor man’s safe-haven like gold.

That’s not the case, however, the silver market right now is being controlled by the interest rate outlook. Rising Treasury yields and cautious Fed policy expectations are what’s weighing on the market and capping gains.

Silver Wears Two Hats

Silver is an asset that wears two hats, sometimes it’s an investment, as when rates are dropping and traders think it will give them a better return. Other times, it’s a heavily sought after industrial metal. AI center demand is one of the key bullish drivers.

War-Driven Oil Spike Keeps the Fed Tight

The war between the U.S. and Iran has driven crude oil to a multi-year high. This is causing inflation fears. When that happens, the Fed is less likely to cut rates. The latest data indicates that traders have reduced almost any chance of a Fed rate cut for these reasons. I don’t think this is going to change until there is a peace deal in the Middle East so rallies are likely to be sold.

Prices could break out to the upside if peace breaks out in the region. Although this won’t reduce short-term inflation worries, traders will be looking to the future after inflation has been given a chance to work through the economy.

More Information in our Economic Calendar.