Silver (XAG) has rebounded from the July low of $54.77 and is now approaching the $64 resistance. A weaker US dollar, lower expectations for September rate hike and stronger US manufacturing data support the recovery. But the upcoming inflation report and volatile oil prices remain important risks. In my view, the long-term structure remains bullish above $30, but silver must break above $90 to complete this correction and open the way to new record levels.
Silver Price Outlook Improves as Fed Hike Odds and US Dollar Weaken
The Federal Reserve maintained the policy rate in the 3.50%-3.75% range in July. There were three officials who were in favor of 25 basis point hike. This division suggests that the Fed has not ruled out another rate increase. But the most recent disappointing employment data reduced the hopes of September rate increase. The easing in expectations of Fed rates is positive for the silver market.
The weaker US dollar is another positive catalyst. The dollar index fell to nearly 99.6 on Friday and is down over 1% in the last 30 days. The weakness in the US dollar improves the silver outlook. It can also help to push investors towards precious metals as a viable alternative to store value.
The next move in the silver price may depend on the inflation report to be released on Tuesday. The headline and core inflation rates declined in June to 3.5% and 2.6%, respectively from 4.2% and 2.9% in May.
The markets are expecting headline inflation to cool to 3.4% and core inflation to 2.5%. A softer inflation report could weaken the case for a rate hike and reduce the real yields. This would be a bullish mix for silver. But the higher than expected inflation uptick may push up yields and hold back the rally in silver.
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See all Silver forecastsUS Factory Growth Supports Silver Demand as Oil Inflation Risks Persist
The latest manufacturing data from US suggests a boost in industrial demand. The July PMI manufacturing index rose to 55.6. This is the highest level since May 2022.
The production index also increased to 58.5 and new orders to 56.7. Silver is commonly used in electrical equipment, vehicles, energy infrastructure and electronics. Thus, higher production and new orders could boost the demand for components that use silver.
China sent a more conservative message. The RatingDog Manufacturing PMI fell to 50.9 in July down from 51.7 in June. But the index was still above 50 which indicates that the manufacturing activity continues to expand. The new orders also rose for the 14th month in a row and export orders expanded for the first time in three months. The continued expansion in China is good for the demand for silver as it still remains an important manufacturing centre.
The primary inflation risk remains the energy prices. WTI crude oil closed Friday at $77.43 a barrel. The price is still significantly higher than last month’s and last year’s level. The uncertainty surrounding the Strait of Hormuz could keep the oil prices volatile. Silver can get boost from higher oil prices using the safe haven and inflation demand. But the renewed surge in energy could keep the Fed cautious and drive rates higher. The most favorable mix for silver would be strong manufacturing, energy inflation, falling real yields and a falling dollar.
Long-Term Silver Price Outlook Remains Bullish Above $30
The long term structure for the silver price remains strongly bullish as seen by the formation of an ascending channel pattern since the 2004 lows. This ascending channel pattern has provided strong support each time the price has hit the lower boundary. However, when the price hit the resistance of this channel in January 2026 at $120, it produced candles with sharp shadows.
This bearish pressure pushed the price toward the $50-$55 support area. The $55 level is also supported by the midline of this ascending channel pattern where the price formed a low in July at $54.77 and produced a bounce. However, the price may consolidate around the current levels to form a bottom and move higher.
But since the price has already hit the strong resistance at $120, the possibility of further drop toward the $40-$50 region remains. Despite this strong correction, the overall price structure remains constructive due to the formation of an inverted head and shoulders pattern from August 2020 to July 2024. As long as the silver price remains above $30, the possibility of a silver surge toward the $200 area remains high.
Silver Rebounds From Cup-and-Handle Support Near $55
The importance of the current support zone is also observed in the monthly chart below, which shows the formation of cup and handle pattern from 1980 to 2025. The price broke above the key neckline resistance of this cup and handle pattern in 2025 to produce a high of around $120.
The correction from $120 in January pushed the silver price toward the $55 area, which is the neckline of this cup and handle pattern. The price retested this neckline and is now rebounding toward the $64 resistance. As long as the $50-$55 support area holds, the possibility of rally in silver remains high. However, if the price is pushed back toward $40, it may offer a strong opportunity for long term investors.
Silver Price Needs a Break Above $72 to Target $90
The short term bullish structure was discussed in the previous analysis, in which the possibility of a drop from $90 toward $50 was discussed. The price dropped toward $50 as expected, hit the lower boundary of this bull flag formation around $55 and started to rebound toward the $64 resistance.
The $64 level remains a strong pivotal level in the short term. However, the next key resistance in the $70-$72 area is marked by the resistance of the descending channel pattern. A break above $72 will likely push the silver price quickly toward the $90 area.
A break above $90 will confirm that the bottom is in. Silver prices will then likely rally toward the $150-$200 region. However, one thing to keep in mind is that if the price fails to break above $72 and continues to drop below the $60 area, the possibility of another decline toward the $40-$50 support zone remains high. However, if the price continues to drop to $40, this will be one last push before the next rally toward the $200 region.
What Is Next for Silver Prices?
The weaker US dollar and lower expectations for a September rate hike support the silver price. The strong US manufacturing activity also improves the industrial demand outlook. But the upcoming inflation report remains important. Softer inflation and lower real yields could support another rise in silver. A renewed increase in energy prices may keep the Fed cautious and limit the recovery.
The $50-$55 area remains the main long term support zone. Silver must break above $64 and then $70-$72 to strengthen the short term recovery. A break above $72 could open the way toward $90. A break above $90 may confirm the next rally toward $150-$200. But a drop below $60 could push the price back toward $40-$50. The broader bullish structure will remain intact as long as silver stays above $30.
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