Silver (XAG) Forecast: Strong Momentum Challenging $77.05 – $78.70 Retracement Zone

Silver Surges on Venezuela Crisis: Can Bulls Reclaim Record Territory?

Spot Silver is climbing early Tuesday on safe-haven buying related to the crisis in Venezuela, but the country itself is not a major player in the silver market. The key fundamentals from last year that drove silver to a record high are still in play.

At 05:02 GMT, XAGUSD is trading $78.64, up $2.05 or +2.67%. This is down a little from the intraday high of $79.12.

The 2025 Rally: A Perfect Storm of Supply Constraints and Strategic Demand

If you watched silver trend higher nearly every day in 2025, you would’ve witnessed a major uptrend supported by tightening supply conditions and low global stockpiles. When prices started to get more expensive to the average investor, investment demand picked up the slack in the form of silver ETFs, which was a relatively cheaper way to participate in the rally. Late in the year, prices really started to accelerate to the upside after the U.S. designated it a critical U.S. mineral.

Fed Policy and the Vertical Acceleration

Prices started to go vertical in late December following the Federal Reserve’s third rate cut of the year. While the Fed projected only one rate cut in 2026, the market continued to drive silver higher on the notion that relatively high inflation and a weakening labor market would force the central bank to cut more aggressively throughout the year.

CME Margin Hikes Trigger Year-End Volatility

Near the end of 2025, volatility and high prices caught the eye of the regulators at the Chicago Mercantile Exchange (CME) and they raised margins twice in one week. The move shook the speculative tree enough to take out the weaker longs and to encourage position-squaring and profit-taking shortly before the end of the year.

Venezuela Intervention Sparks Geopolitical Safe-Haven Bid

The pattern on both the daily and weekly charts showed potentially bearish closing price reversal tops, but sellers haven’t showed up to confirm the charts. Furthermore, this weekend, the U.S. took military action against Venezuela and captured President Nicolás Maduro. This unprecedented move sent shockwaves throughout the global community as some pundits openly questioned, “who’s next?” This led to the aggressive rally on Monday and the follow-through move early Tuesday.

Critical Technical Battleground: The 61.8% Retracement Level

Using the bullish fundamentals as a floor, buyers are now riding the geopolitical wave. So far, buyers have recovered about 61.8% of the sell-off from $84.03 to $70.07. This level is $78.70. Our technical analysis suggests that in order to sustain the current rally from $70.07, buyers are going to have to take out $78.70 with conviction. A move of this magnitude will put $84.03 back in play.

Key Levels Define Near-Term Direction

On the flipside, if a rally to $78.70 is all buyers can muster and the market starts to break back under the 50% level at $77.05, then we’re going to have to start considering the start of a near-term correction with downside targets at $72.41 and $70.07.

The bullish picture sees $70.07 as a new two-day swing bottom, up from the last two-day swing bottom at $48.64 on November 21. A bearish outlook sees the formation of a secondary lower top somewhere near $78.70 with confirmation aligned with a breakdown under $77.05.

The Verdict: All Eyes on $77.05-$78.70

Looking ahead, traders should be laser-focused on the reaction to $77.05-$78.70. It should determine the near-term direction and tone.

More Information in our Economic Calendar.