Silver (XAG) Forecast: Rally Stalls at 50-Day MA as Dollar Caps Gains

Silver Holds Gains but Runs Into a Wall at the Close

Spot Silver (XAGUSD) pushed higher Wednesday but ran out of gas into the close. The ceasefire extension gave it a window and the dollar slammed it shut. That’s the whole session in two sentences.

Technical Outlook

Technically, silver continues to struggle for direction at the 50-day moving average at $78.78. This indicator has taken on the characteristics of a pivot so we’re going to base our short-term projections on trader reaction to it.

Despite the monthlong minor trend climb from $61.00, the rally appears to be stalling. This doesn’t suggest the end of the move, but rather a reset. Traders are clearly telling us they have no reason to take out offers and buy strength. And with the 200-day moving average at $61.49 guiding the uptrend, I still think we’re in buy the dip mode.

So if traders don’t want to take out the 50-day MA to extend the rally, then start watching for the dip. Our nearest short-term support zone at $72.03 to $69.43 may offer an attractive opportunity if tested. Otherwise, you can keep banging your head playing for a breakout above the 50-day MA or the minor swing top at $83.06.

It’s the classic set-up the market keeps playing with us that is buy strength or buy weakness. With the 200-day MA our long-term anchor, I’m not giving up on the long-side, just looking for an opportunity to present itself with a solid exit strategy if I’m wrong. I’m not concerned about where it can go, but in these chopping conditions, I want to know my exit first.

Ceasefire Extension Gave Silver a Bid

Trump extended the ceasefire and liquidation pressure came off. That’s what moved silver early in the session. When traders aren’t being forced to sell to cover margin calls, precious metals find buyers fast. Silver followed Spot Gold (XAUUSD) and the broader risk rally higher and held onto modest gains through most of the day.

Dollar Strength Capped the Move

The U.S. Dollar Index firmed late in the session and that was the end of the silver rally. A stronger dollar makes silver more expensive for buyers outside the U.S. and demand dries up fast at higher levels. I’ve watched this pattern play out enough times to know that when the dollar catches a late bid, silver stalls. That’s exactly what happened Wednesday.

Warsh and Yields Are the Ceiling

Kevin Warsh told the Senate Tuesday he made no promises to Trump on rate cuts. The market heard that clearly. Rate cut expectations got pushed further out and the 10-Year U.S. Treasury yield is staying near recent highs because of it. That’s a direct headwind for Spot Silver (XAGUSD). Higher yields raise the cost of holding a non-yielding asset and investors stop chasing strength. Until yields start pulling back or the dollar rolls over, silver rallies are going to keep stalling at resistance.

What to Watch

Silver can hold when forced selling stops. It can’t run when the dollar is firm and yields are elevated. Those two things are in control right now and Warsh isn’t giving the market any reason to expect a change soon. Sideways to slightly lower is the path until something shifts.

More Information in our Economic Calendar.