Silver (XAG) Forecast: Yields Near 20-Month High Send Silver Market Lower

Silver Opened September With a 2% Hit

Silver started the month on the wrong side of every trade that matters. Yields running. Dollar firmer. Crude above $90 on fresh Iran strikes. Gold already sliding. The metal did not have anywhere to hide Tuesday morning.

At 08:45 GMT, spot silver is trading at $65.04, down $1.52 or 2.28%. Prices reached $67.08 early before sellers took control and pushed the metal as low as $64.84. Silver is now below the short-term pivot at $66.87 and that level has flipped to resistance.

August’s gain is still on the books. Tuesday’s tape says nobody is trading the monthly chart right now.

Warsh and 4.78% on the 10-Year Did the Damage

The 10-year Treasury yield climbed to about 4.78% Tuesday, the highest level in nearly 20 months. That is the number silver is trading against. Warsh said at Jackson Hole Friday that the Fed’s preferred PCE measure is running at 3.7% over 12 months and faster over six months. The 2% target is firm. The market heard September and started repricing.

The dollar index held near 99.60 on the same yield move. Silver got hit from both sides at once. Yields up, dollar up, and the metal gave back $1.52 in a morning session. A stronger dollar makes silver more expensive for buyers using euros, yen or other currencies. That demand usually slows when the dollar is running and it showed up in the price Tuesday morning.

Crude Above $90 Is Not Helping the Metal

Brent crude is above $90 after the U.S. struck Iranian positions on Larak Island over the weekend. Iran hit back at U.S. bases in Jordan. WTI is trading above $86. The Strait of Hormuz is still disrupted and the oil market is putting war premium back in after pulling it out last week.

Silver traders already know what crude above $90 does to the rate picture. Warsh is already watching inflation. The oil move Monday and Tuesday reinforced the same story the yield move was already telling. The Middle East headlines are in the price. They are working against the metal, not for it.

Gold Is Not Offering a Lifeline

Spot gold spent Tuesday in the mid-$4,440s after slipping Monday. The larger metal took a 3% hit Friday on the same Warsh speech and has not recovered. Silver follows gold when both metals are under pressure. It follows harder. That pattern held Tuesday.

Gold is dealing with the same yield and inflation headwinds. The metal had a geopolitical bid available from the Middle East and could not use it because the rate trade was stronger. Silver does not have gold’s central-bank buying underneath it. When gold wobbles, silver takes a bigger hit. Tuesday’s $1.52 drop on a day gold barely moved shows the amplification. The smaller, more volatile metal absorbed the selling gold was able to deflect.

After a month where silver gained more than 14%, the selling Tuesday looked like traders taking money off the table with multiple headwinds arriving at once. The payoff for sitting in the metal got harder to justify with Treasuries paying 4.78% and crude adding to the inflation argument. When yields, the dollar, oil and gold all line up against silver on the same morning, the traders who rode August’s rally are going to book some of that gain. That is what the tape looked like Tuesday.

Daily Spot Silver (XAGUSD) Technical Analysis

Spot silver is sharply lower early Tuesday after crossing decisively to the weak side of a short-term pivot at $66.87. This level is now resistance.

The downside momentum created by the sell-off could drive XAGUSD into the intermediate 50% level at $62.98. Look for a possible technical bounce on the initial test of this price, but if it fails, the move could extend into the 50-day moving average at $61.51.

The major support area is the 50% level of the record high at $60.835 and the more-than-one-month low at $54.78.

What to Watch

Friday’s jobs data is running the silver trade for the rest of the week. Warsh set the bar at Jackson Hole. The 10-year at 4.78% and crude above $90 are both pointed against the metal and both are tied to the same inflation story. A firm payroll number with stronger wages keeps the rate pressure on silver and gives sellers more room to work with. Softer employment data would force a repricing of September odds and that is the only thing that gives silver a clean bid from here. Gold is not providing cover. The dollar is firm. The metal is fighting every headwind at once going into the jobs week.

Silver broke the pivot at $66.87 Tuesday and that level is now resistance above. The intermediate 50% at $62.98 is the next level where buyers have a reason to show up. Below that, the 50-day moving average sits at $61.51 and the major support zone runs from $60.835 down to $54.78. Silver needs to hold above $62.98 on this move or the sell-off from August’s highs starts looking like more than profit-taking.

More Information in our Economic Calendar.