Silver (XAG) Forecast: Silver Rally Builds as Dollar Drops and Ceasefire Lifts Market

Spot Silver Jumps to Highest Level Since March 13 on Ceasefire and Dollar Weakness

Spot Silver (XAGUSD) closed at $80.80 Friday, its highest level since March 13 and up about 4% for the week. Three things drove it. The ceasefire, the dollar and oil. They all lined up in the same direction and silver ran with it.

The 10-day ceasefire between Israel and Lebanon pulled fear out of the market. Oil fell 9% the same day after Iran confirmed the Strait of Hormuz would stay open. Those two headlines hit at the same time and silver responded to both. Lower oil eases inflation pressure and keeps rate cut expectations alive. Silver has industrial demand underneath it that gold doesn’t. Solar panels, electronics and electric vehicles all require it in meaningful quantities.

The U.S. Dollar Index hitting its lowest level in about six weeks did the rest of the work. A weaker dollar makes Spot Silver cheaper for foreign buyers. I keep coming back to the dollar as the single most important variable right now. It’s been the difference between silver moving and stalling all week. When it found a floor late Friday silver felt it immediately and the close came off the highs.

What Happens Next

The dollar, oil and the ceasefire all cooperated this week. That’s a clean setup but it’s also a fragile one. A U.S. Dollar Index recovery triggers selling fast and a Brent crude rebound toward previous highs brings the higher for longer narrative back. Gold staying strong keeps silver in play. Ceasefire breaks down and the industrial demand story loses its appeal overnight. I’m watching all three going into Monday. Next week we find out if the cooperation holds.

Technical Outlook

Spot Silver jumped to its highest level since March 13 on Friday in a move that may have solidified the 50-day moving average at $78.93 as support. What we need to see is a breakout over the major 50% level at $83.61 to possibly extend the rally into the intermediate retracement zone at $91.34 to $98.48.

If sellers return on Monday then we’ll know it when the market crosses to the weak side of the 50-day moving average. If we get enough downside momentum, we could see a break into multi-layers of support at $74.63, $72.03 and $69.40.

More Information in our Economic Calendar.