Silver (XAG) Forecast: Silver Analysis Eyes 50-Day MA as Breakout Trigger

Spot Silver Breaks Above $76 as Dollar and Yields Both Pull Back

Spot Silver (XAGUSD) is up more than 2% and trading near $76.43. The U.S. Dollar Index dropped below 99. The 10-Year U.S. Treasury yield pulled back from 4.52% to around 4.43%. Both moves at the same time opened the door and buyers walked through it. Silver does not pay interest. When yields drop, the cost of holding it drops with them. When the dollar weakens, international buyers get a discount. That combination is why the metal is running today.

Dollar Broke 99 and Silver Ripped

The U.S. Dollar Index cracked below 99 and Spot Silver (XAGUSD) took off. The dollar has not fallen apart but it did not need to. Silver was already sitting on support at $74.63 looking for an excuse. The dollar gave it one. Buyers came in and pushed through levels that had been holding for days.

The move has room to extend if the U.S. Dollar Index keeps sliding. The 50-day moving average on Spot Silver (XAGUSD) sits at $76.10 and the market is pressing right against it. A few more sessions of dollar weakness and that moving average breaks.

Yields Pulled Back at the Right Time

The 10-Year U.S. Treasury yield ran at 4.52% earlier this week and got rejected. The drop back to 4.43% opened the trade for precious metals. Bonds were paying enough to keep money out of silver at 4.52%. At 4.43% that math starts to shift.

The Federal Reserve is sitting at 3.5% to 3.75% and not moving in either direction. Energy costs are keeping inflation alive. The committee cannot cut into that. They have not signaled a hike either. Nobody knows what happens next and the market is trading that uncertainty on both sides of every data release.

Friday’s May employment report and the JOLTS job openings data earlier in the week are going to push rates expectations one way or the other. A hot labor number sends yields right back toward 4.52% and the dollar firms up with it. Spot Silver (XAGUSD) gives back today’s move in that scenario. A cool number and the Federal Reserve conversation shifts toward easing. That is the only thing the bulls are waiting for right now.

Oil Is Working Both Sides

Spot Brent crude oil is near $94. West Texas Intermediate crude oil is around $91 after surging earlier in the week. The Strait of Hormuz disruption is keeping barrels off the market and energy prices elevated.

Rising oil feeds into consumer prices. That part of the trade is supporting Spot Silver (XAGUSD) because inflation hedging demand picks up when energy costs climb. The problem is the clock running behind it. Crude above $90 for long enough forces the Federal Reserve to respond. That response means the dollar and yields both go higher. Both of those work against silver. Oil is a tailwind today. It becomes a headwind the longer it stays elevated.

Geopolitical Risk Is Real

Washington, Tel Aviv, and Tehran are all shooting at each other and nobody is talking anymore. Ceasefire negotiations broke down. Strikes went both ways over the weekend. The diplomats are losing ground to the generals. Money moves into hard assets when that happens.

Gold gets the headlines but silver is catching the same bid and then some. The metal has industrial demand on one side and store-of-value demand on the other. Right now both sides are active. Industrial consumption from electronics and infrastructure has not slowed down. Safe-haven buying is adding on top of that. The combination is what pushed Spot Silver (XAGUSD) through resistance today.

Daily Spot Silver (XAGUSD) Technical Analysis

Spot silver is edging higher on Tuesday and in a strong position relative to the 50-day moving average at $76.10. The problem isn’t identifying a potential upside breakout level, it’s getting traders to take out offers. The trade the past few weeks has been highlighted by passive dip buyers looking for value. This isn’t necessarily bad because it could mean they are accumulating for the next rally. However, continuing to reject the 50-day MA may start to bring in sellers then all of a sudden, the pattern will start to look more like distribution with downside potential.

While an upside breakout will put the long-term 50% level at $83.61 on the table, the risk is a failure at the long-term 61.8% level at $74.63 and a possible test of the 200-day moving average at $67.14.

For today, let’s lean to the upside because of the early strength. Look at the 50-day MA at $76.10 as a potential breakout level with the swing top at $78.83 the first objective. If this level is taken out by buyers hitting offers then the market has a chance to rally to $83.61 over the near-term.

Our bullish outlook relies on traders continuing to support the Fib level at $74.63. If this fails, sellers will have a clear shot at a dump to $71.84 to $70.86. This is the last major support area before the major support, the 200-day moving average at $67.14.

What to Watch

Two things are keeping Spot Silver (XAGUSD) bid right now. The U.S. Dollar Index is soft. The 10-Year U.S. Treasury yield is pulling back. Take either one of those away and the rally stalls. Friday’s employment report is the event that could do it. A hot number firms up the dollar and pushes yields higher in the same session. That would erase the conditions that made today’s move possible.

The chart is sitting right on top of the 50-day moving average at $76.10. That is the breakout level. Get above it with conviction and the swing top at $78.83 is first with $83.61 after that. The problem is the same one the technical section flagged. Buyers keep bidding for dips but nobody wants to take out offers. $74.63 is the trap door. Every passive buyer who accumulated on dips is sitting above that level. Break it and they all become sellers at the same time. $71.84 goes first. Then $70.86. Then the 200-day moving average at $67.14 and there is nothing between here and there that slows the fall down.

More Information in our Economic Calendar.