Silver (XAG) Forecast: Geopolitical Tensions & Dollar Weakness Power Market Recovery

Will This Rally Break Key Resistance Levels

Silver prices are staging a notable recovery, climbing for two consecutive sessions after touching a two-month low of $29.68 last week. The precious metal has found renewed strength as Treasury yields and the U.S. dollar retreat from recent peaks, with spot silver reaching its highest level since November 11. The current price action suggests a potential shift in market sentiment, supported by technical rebounds and fundamental factors.

Are Technical Indicators Signaling a Trend Reversal

The market is currently testing a crucial 50% retracement level at $31.29, with the 50-day moving average positioned at $31.73 serving as the next significant technical barrier. A successful breach above these levels could open the path to a potential target zone between $32.275 and $32.89.

The recent price action has formed a strong support base, though the prevailing downtrend suggests sellers may emerge around these resistance levels. Technical momentum indicators are showing early signs of reversal, with increasing volume supporting the upward movement.

What’s Driving Silver’s Price Action

The dollar’s pullback from its one-year high has provided substantial support for silver prices, making the metal more attractive to international buyers. Monday’s session saw an impressive 3.05% gain, indicating strong buying momentum as market participants who had been waiting for stabilization began to enter positions.

Treasury yields have also retreated from recent highs, contributing to silver’s appeal as an alternative investment. Market liquidity has improved significantly, with trading volumes indicating renewed institutional interest in the precious metals sector.

How Will Global Events Impact Price Movement

The escalation in the Russia-Ukraine conflict, marked by Russia’s largest air strike in nearly three months, has increased silver’s appeal as a safe-haven asset. Additionally, market sentiment is being shaped by Federal Reserve policy expectations, with current pricing indicating a 58.9% probability of a 25-basis-point rate cut in December.

The potential for monetary policy shifts, combined with geopolitical tensions, creates a supportive environment for precious metals. Traders are closely monitoring upcoming Fed official speeches for additional insights into the central bank’s rate path, which could further influence silver’s price direction.

Market Forecast

Based on the technical setup and fundamental factors, silver appears positioned for further upside in the short term, targeting the $32.275 to $32.89 range. However, traders should maintain caution as the main trend remains bearish, suggesting potential resistance at higher levels.

The combination of dollar weakness, geopolitical tensions, and potential Fed policy shifts provides support, but the market may face selling pressure near the outlined resistance zone. Short-term traders should watch for a confirmed break above the 50-day moving average as a potential trigger for extended gains.