Silver (XAG) Forecast: Will Margin Hikes Kill Rally or Create Value at $64.79-$60.25?

Record High Followed by Wicked Reversal as CME Raises Margins

Spot silver (XAGUSD) finished sharply lower last week after hitting a record high on Monday. The dramatic turnaround produced a wicked closing price reversal top and not just the standard variety—higher-high, lower close. This potentially bearish chart pattern also featured a close below the open and lower than the week’s midpoint, which means the selling was serious.

The closing price reversal top did not change the trend to down, but it does suggest further downside pressure after Chicago Mercantile Exchange (CME) officials decided the market was trading a little too hot. The aggressive move was primarily designed to alleviate upside pressure.

For the week, XAGUSD settled at $72.82, down $6.49 or -8.18%.

From Momentum to Value: A Strategic Shift

With the fundamentals still bullish, our long-term focus will continue to be on the upside, but we’re going to be focusing on value rather than momentum. What this means is the market is likely to find buyers on breaks into value rather than just taking out weak offers.

Reversal Pattern Targets $60.25 Support Zone

Here are more details on the closing price reversal top. A trade through last week’s low at $70.07 will confirm the chart pattern. Once confirmed, we could be looking at a 2 to 3 week correction. The current rally is $45.55 to $84.03. The first target of the chart pattern is its 50% to 61.8% retracement zone at $64.79 to $60.25. Since the main trend is up, we expect buyers to return on a correction into this zone.

Key Levels to Watch This Week

If we don’t see the confirmation this week or if there is any hesitation on the follow-through break, we could see a “dead cat” bounce. Currently, $84.03 to $70.07 is our trading range. If traders decide to buy early this week, we could see a snapback rally into its retracement zone at $77.05 to $78.70.

If this market is headed lower, short-sellers will emerge on a rally into $77.05 to $78.70. They are going to try to form a secondary lower top.

If buyers can drive the market back through $78.70 with conviction, then we’ll see a test of $84.03.

Fundamentals Remain Bullish Despite Margin Hikes

Fundamentally, there is still record demand for silver and a supply shortage. However, trading futures became more expensive with the CME raising margins twice in a week. They aren’t likely to shift them lower until the volatility slows down.

For months, silver operated under the exchange radar with a solid uptrend of higher-tops and higher-bottoms driven by relentless demand. But then traders may have gotten a little greedy and high volatility caught the attention of the regulators. Historically, the exchange has stopped rallies in their tracks with a margin hike, but some of those rallies were based on flimsy fundamentals. The current rally is being driven by solid fundamentals. However, the rules of the game changed dramatically with the margin hike.

What Needs to Happen for Rally to Resume

A few things have to happen, in my opinion, before the rally resumes. Firstly, volatility has to come down. This should occur when buyers stop chasing the market higher by taking out offers. This is FOMO trading, the Fear Of Missing Out. If this occurs, then look for a clean correction into a value zone like $64.79 to $60.25.

Lastly, the fundamentals have to stay constant. The supply shortage and the strong demand for physical silver have to continue. Also, the Fed is going to have to continue cutting rates beyond its one cut projection for 2026.

Jobs Report Friday: First Test of Fed’s 2026 Path

As far as the Fed is concerned, we’ll get our first look at rate cut reality on Friday when the U.S. government releases its first timely Non-Farm Payrolls report. A strong number will keep the Fed on hold, pressuring silver prices. Soft numbers will be supportive.

More Information in our Economic Calendar.