Silver (XAG) Forecast: Silver Rally Eyes $83.61 Breakout as NFP Could Force Fed’s Hand

Silver Surges 5.87% as Traders Bet on Weak NFP

Spot Silver is edging higher shortly before the release of the U.S. Non-Farm Payrolls report at 13:30 GMT on Wednesday. The price action suggests that traders are betting on a weak jobs report. This outlook is also being supported by lower Treasury yields and a weaker U.S. Dollar.

At 12:53 GMT, XAGUSD is trading $85.53, up $4.74 or +5.87%.

Consensus at 50K, But Zero is Possible

Traders are pricing in a weak jobs report. The consensus calls for about 50,000 jobs being added in January, but anything close to zero is possible. Additionally, annual revisions going back to early 2024 could paint a gloomy picture of the economy. Downward revisions to reports from December through October are also possible because last fall’s government shutdown figures are still being processed and evaluated.

This report could be the source of volatility in the silver market, with Goldman Sachs coming in under the consensus at 45,000 but Citigroup projecting a gain of 135,000, well above the estimates.

The revisions should be watched carefully too, because the weaker they are, the greater the case for a Fed rate cut in June and possibly in March. Both are bullish scenarios for silver. Goldman estimates the revisions to be between 750,000-900,000. Last month, Fed Chairman Jerome Powell put the number closer to 600,000.

Lower Yields and Weaker Dollar Drive Silver Higher

10-year Treasury yields are lower on Wednesday in anticipation of a weak jobs report and increased odds of an earlier-than-expected Fed rate cut. This is not only driving the U.S. Dollar lower but also increasing demand for dollar-denominated silver. The U.S. Dollar Index is trading at a one-week low and threatening to break down under support at 96.476.

Technical Picture: Breakout Over $83.61 Opens Door to $92-$99 Zone

Silver is higher and threatening to break out over a key 50% level at $83.61 after holding support for a third straight session over the 50-day moving average at $79.14. The 50-day MA is the major trend indicator in my opinion.

Taking out $83.61 with conviction could trigger an acceleration to the upside, with an initial target of $92.20 to $92.87. We could see sellers on a test of $92.87 to $99.66. This is the last major resistance zone before the all-time high at $121.67, so I expect it to be heavily defended.

On the downside, a failure to hold the 50-day moving average will be a clear sign of weakness. This could mean a quick break to $74.73 and maybe a retest of $64.06. It may not mean the trend is getting ready to turn bearish, but it may just signal that the market needs more time to form a solid support base.

More Information in our Economic Calendar.