Silver (XAG) Forecast: Dollar Surge Pressures Silver Market—More Downside Ahead?

Will Silver Find Support After Breaking Key October Level?

Silver dropped sharply on Thursday, falling below the October 8 support level of $30.12. This break positions silver for further potential declines, with the next significant target being the September 18 bottom at $29.71, followed by the 200-day moving average at $28.67. Silver’s downward trend is compounded by dollar strength and steady Treasury yields, both of which have pressured precious metals across the board. Like gold, silver’s near-term price action remains under scrutiny as markets anticipate upcoming U.S. economic data releases.

How Does Dollar Strength Impact Silver’s Decline?

The U.S. dollar’s rally to a one-year high has made silver more expensive for international buyers, significantly dampening demand. This dollar surge has similarly weighed on gold, which fell over 1% to a two-month low on Thursday. A strong dollar environment often curbs investor interest in precious metals, as it erodes their value as alternative assets. Han Tan, Exinity Group Chief Market Analyst, noted that “gold bulls have wilted in the face of the rampant dollar,” a sentiment equally applicable to silver. As Treasury yields hover at recent highs, investors are re-evaluating the need for metals as safe havens, which limits upward potential for both silver and gold in the short term.

What Economic Data Are Silver Traders Watching?

Silver investors are closely watching the Producer Price Index (PPI) report for October, which is expected to reflect a 0.2% monthly increase. This data, alongside remarks from Federal Reserve officials later today, will likely influence silver’s price by signaling potential changes in monetary policy. With Fed Chair Jerome Powell set to address the economic outlook, market participants are looking for indications on the likelihood of another rate cut in December. A softer stance from the Fed could ease some pressure on silver by slowing the dollar’s advance and potentially spurring some recovery in metal demand.

Can Silver’s Next Support Level Hold?

Following the breach of $30.12, silver’s next critical support stands at $29.71. A break below this level could pave the way for additional downside, with the 200-day moving average at $28.67 serving as a subsequent target. Resistance sits around the 50% retracement level at $30.67, and the 50-day moving average at $31.55, which silver would need to reclaim for any meaningful recovery. For now, the technical outlook appears bearish as the market braces for further downside, especially if the dollar retains its strength.

Short-Term Forecast: Will Silver Extend Its Decline?

Given the bearish momentum and external pressures, silver’s short-term outlook suggests continued weakness. If prices fail to hold above $29.71, a move toward $28.67 could materialize in the days ahead. However, if silver manages to find support at $29.71, a minor rally to retest resistance near $30.67 may be possible. Much like gold, silver is under pressure, and additional downside is likely if the U.S. dollar remains strong and Treasury yields stay elevated.