Silver (XAG) Forecast: Long Yields Trigger Sharp Selloff Despite Soft Dollar

Silver Got Sold Into a 30-Year Yield That Will Not Come Down

Spot Silver reversed hard Tuesday after reaching $66.56 earlier in the session. The long end of the Treasury curve did the damage. The 30-year yield pushed near 5.31%, its highest since 2007, and the selling in silver accelerated into the afternoon. The dollar is still near multimonth lows after softer data cut September hike odds, but that has not mattered for two sessions now. The long bond is running the precious metals trade and the front end of the curve cannot overrule it.

Crude above $91 is feeding the same inflation story that has bond sellers pressing the long end higher. Silver is heading back toward the 50-day moving average with the minor swing bottom from last week right below the session low.

At 17:31 GMT on August 18, Spot Silver (XAGUSD) was trading at $63.97, down $1.81 or 2.75%.

Daily Spot Silver (XAGUSD) Technical Analysis

Spot Silver is sharply lower late in the session on Tuesday. The plunge to $63.52 has put the market in a position to take out the minor swing bottom at $63.50. A trade through this level will change the minor trend to down and shift momentum to the downside. This will likely lead to a near-term test of the 50-day moving average at $61.27 and 50% of the all-time high at $60.83.

On the upside, although Spot Silver recently posted a swing top at $66.80, most of the price action has centered on the midpoint between the 50-day moving average and the 200-day moving average. Today, that midpoint is at $66.47.

Taking out $66.80 will signal a resumption of the uptrend with the 200-day moving average at $71.68 the next major target.

The Dollar Stayed Soft and Silver Sold Off Anyway

The dollar index held near 99.60 Tuesday, close to the lower end of its recent range. Monday gave silver buyers the dollar and yields moving in the same direction. Tuesday took the yield side away and the metal fell nearly 3%.

The dollar was not weak enough to attract fresh buying and long yields were too high to ignore. Silver needs both moving lower together. It has one of those conditions and the price action is telling traders that one is not enough.

The 30-Year Is Trading Deficits and Debt Supply, Not the Fed

The two-year yield held around 4.18%, still reflecting lower September hike odds. The 30-year pushed near 5.31% and is reflecting a completely different set of problems.

Treasury buyers want more yield before committing money for decades. Corporate borrowing for AI data centers, power projects and chip infrastructure is adding to the supply of long-dated paper at the same time.

The front end sees a Fed that may hold in September. The long end sees deficits, heavy issuance and inflation above target. Silver is trading the long end.

Brent Above $91 Keeps Rebuilding the Inflation Case

Brent crude moved above $91 a barrel Tuesday, its strongest level since late July. WTI also pushed higher. The ceasefire arrangement has ended. Iran has threatened a more offensive posture. The Strait of Hormuz remains restricted and Washington is not extending the deal.

The Middle East risk can put a protective bid under precious metals on the breaks. Tuesday’s trade showed the other side. Higher crude is feeding into inflation expectations and giving bond sellers another reason to hold the long end at these levels. Gasoline remains above $4 per gallon and the next round of price data has a better chance of capturing the recent move in energy costs. The inflation side of the oil trade won on Tuesday.

FOMC Minutes and Jackson Hole Are Keeping Buyers on the Sideline

Wednesday’s minutes from the July meeting land with three officials already on record voting for a quarter-point increase. The market cut September hike odds sharply over the past week on softer data. The minutes tell you whether that repricing went too far. Jackson Hole follows next week with policymakers sitting between weaker growth numbers and crude above $91. Silver just reversed $3 off its session high, and neither event is offering buyers a reason to step back in ahead of the data.

What to Watch

The 30-year yield at 5.31% is doing the damage. The front end can price a September hold all it wants. Silver is trading the long bond, and the long bond is trading deficits, debt supply and inflation that has not come back to target. Crude above $91 is making that worse by feeding the energy cost story into every forward inflation estimate.

Silver reversed $3 off its session high and is sitting just above a swing bottom that changes the minor trend if it breaks. The 50-day moving average is not far below. FOMC minutes Wednesday and Jackson Hole next week are the events that can reset the rate debate. Until the long bond stops overriding the front end, silver rallies are selling opportunities.

More Information in our Economic Calendar.