Silver (XAG) Forecast: Momentum Fades as Traders Search for Value in Silver Market

Silver Fades at the 50-Day Moving Average as Dollar and Yields Apply Pressure

Spot Silver (XAGUSD) is getting hit Thursday and the same forces that capped gold are running this market too. Dollar firming, yields climbing, oil above $100. The metals are trading off the same script right now. Keep reading for the levels and what needs to change to bring buyers back.

Technical Outlook

Sellers are pressing Spot Silver (XAGUSD) lower at the mid-session on Thursday. The price action indicates traders are respecting the 50-day moving average at $78.61, a sign perhaps that there aren’t any buyers at current price levels to fuel a breakout to the upside. This is telling me that traders are looking for value. It could mean that the news isn’t great for the bulls so buyers don’t want to pay up, they want silver at their price.

If that’s the case then over the near-term, the market should break back into a support area like the short-term retracement zone at $72.03 to $69.43. The bulls are likely to be comfortable in that area because it brings them closer to their leans, the 200-day moving average at $61.68 and the main bottom at $61.00. And for that matter, 50% of the all-time high at $60.83.

I’ll be wrong about my assessment if buyers take out the 50-day moving average and begin building a sustainable support base on the bullish side of the indicator. Once they can establish a support base then it really doesn’t matter when it takes off to the upside because they’ll have the 50-day MA to lean on.

The simple short-term outlook is like this. If the buying is strong at current levels, there is a breakout over the 50-day MA. If the buying isn’t strong, traders will allow the market to drift downward into the short-term retracement zone at $72.03 to $69.43. If they recognize value then they will buy it.

Dollar and Yields Are Doing the Damage

Spot Silver (XAGUSD) is down $1.69 or 2.18% to $76.03 at the time of writing. The U.S. Dollar Index is firming and that prices foreign buyers out fast. The 10-Year U.S. Treasury yield is pushing to a one-week high and that pulls money toward assets that actually pay something. Silver pays nothing. That combination doesn’t leave a lot of room for bulls to work with.

Oil Above $100 Is the Complication

Spot Brent crude oil above $100 brought inflation fears back into the conversation and that’s where silver runs into trouble. Higher oil means inflation stays elevated. Elevated inflation means the Fed holds rates longer. The Fed holding rates longer keeps the dollar firm and yields supported. That’s a ceiling on Spot Silver (XAGUSD) regardless of what geopolitics are doing and right now all three forces are pointing the same direction.

What Flips the Outlook

This looks like a pullback inside a larger trend, not a breakdown. The 200-day moving average at $61.68 is still the long-term anchor and that tells you the buy the dip structure is intact. What changes the near-term picture is a shift in Fed expectations or yields starting to pull back. Either one of those brings buyers back into the value zone at $72.03 to $69.43. Until then the bias stays lower.

More Information in our Economic Calendar.