Silver (XAG) Forecast: Approacheing Value Zone at $28.40 to $26.87 – Will Fresh Buyers Emerge?

Silver’s Wild Ride: A Tale of Two Markets

The relationship between the U.S. Dollar Index, 10-year Treasury yields, and precious metals since October 2024 shows clear correlations, with particularly notable movements in the silver market. Silver’s price action has shown significant volatility, making it the central focus for understanding how these markets interact.

From Bottom to Top: Silver’s Spectacular Rally

Looking at the charts, silver (XAG/USD) established a significant low at $26.47 in early August 2024, before launching into a sharp rally that peaked at $34.87 in early November 2024. This impressive surge of 31.7% occurred while the U.S. Dollar Index was weakening, dropping from 106.111 to 103.373 between early and late November. During this same period, the 10-year Treasury yield peaked at 4.505% in mid-November before beginning its corrective phase.

The Great Unraveling: Silver’s Recent Retreat

Silver’s momentum couldn’t be sustained above $34.00. The market has since undergone a substantial correction, with prices falling to the current level of $28.90. This decline has occurred even as the U.S. Dollar Index maintained a range between 105.420 and 108.541 throughout December 2024. Most notably, silver’s decline has been more pronounced than gold’s, which is typical given silver’s historically higher volatility.

Treasury Yields: The Hidden Hand Behind Metal Markets

The 10-year Treasury yield’s recent move to 4.631% in December appears to have influenced both precious metals, but silver has shown greater sensitivity to these yield changes. Higher yields typically pressure precious metals by increasing the opportunity cost of holding non-yielding assets. This relationship is evident in silver’s recent price action, as the metal struggles to maintain support while yields remain elevated.

Technical Battleground: Silver at Critical Crossroads

Silver’s price has broken decisively below its 200-day moving average at $29.77, confirming the bearish trend that began after the $32.33 resistance rejection in mid-December. The failure to maintain support above the 200-day moving average, combined with the recent break below $29.00, suggests increasing bearish pressure. The next significant support level stands at $28.74, and its defense will be crucial for preventing a deeper decline toward the August low of $26.47.

Gold vs Silver: A Study in Contrast

Gold (XAU/USD), while also affected by these market relationships, has demonstrated more resilience than silver, maintaining a trading range between $2,583.91 (December 13) and $2,790.17 (November peak). This relative stability in gold compared to silver’s more volatile movement reflects gold’s status as a preferred safe-haven asset during periods of market uncertainty.

What’s Next for Silver?

Looking ahead, silver’s price action will likely continue to be influenced by the interplay between Treasury yields and dollar strength. With the price now trading well below its 200-day moving average, the immediate support at $28.74 becomes critical. A breach below this level could accelerate selling pressure toward the August low of $26.47. However, the metal’s industrial demand components and technical support zone between $26.47-$28.74 could provide a foundation for a potential recovery if dollar strength wanes or yields begin to retreat.

More Information in our Economic Calendar.