Silver (XAG) Forecast: Strong Breakout Fades—Is Silver Setting Up for Another Surge?

Silver Surges Above $33 Before Retail Sales Data Triggers Pullback

Silver prices rallied sharply on Friday, breaking through key resistance levels before retreating below $33.00 following weaker-than-expected U.S. retail sales data. The metal surged past Fibonacci resistance at $32.53 and last week’s high of $32.65, reaching $33.39—its highest level since October 31. The breakout appeared to be fueled by a mix of short-covering and fresh buying interest.

The daily chart suggests silver has room to move higher, with the next significant resistance level near $34.87. However, the weaker retail sales report has tempered bullish momentum in the short term.

At 14:09 GMT, XAG/USD is trading $32.89, up $0.55 or +1.69%.

Weak Retail Sales Increase Pressure on the Fed

Retail sales dropped 0.9% in January, well below market expectations for a 0.2% decline, signaling a potential slowdown in consumer spending. This follows an upwardly revised 0.7% gain in December, indicating that momentum has faded. Excluding autos, sales fell 0.4%, also missing forecasts for a 0.3% increase.

The drop in spending could raise concerns about economic growth in the first quarter, as consumer activity accounts for roughly two-thirds of U.S. GDP. Declines were notable across multiple categories, with sporting goods, online retail, and motor vehicle sales all posting significant losses. Meanwhile, inflation remained a factor, with consumer prices rising 0.5% in January.

Gold Holds Near Record Highs as Safe-Haven Demand Rises

Gold prices continue to trade near record highs, with $3,000 emerging as the next key psychological level. The metal briefly touched $2,942.78 earlier in the week before consolidating. Investors remain focused on geopolitical risks, including U.S. trade policy uncertainty, which has fueled demand for safe-haven assets.

Concerns over a potential trade war have intensified after President Trump directed his team to draft retaliatory tariffs on countries imposing taxes on U.S. imports. This move is seen as inflationary, potentially boosting gold’s appeal as a hedge. Meanwhile, the latest U.S. inflation data showed wholesale prices rising 3.5% year-over-year, reinforcing expectations that the Federal Reserve will keep interest rates steady in the near term.

Fed Rate Outlook and Treasury Yields in Focus

Despite higher inflation readings, traders are now weighing whether the Fed might soften its stance on rate cuts after the weak retail sales report. Market expectations still lean toward no rate cuts before September, but any further signs of slowing economic activity could shift that outlook.

U.S. Treasury yields remained stable on Friday as investors assessed the impact of recent inflation data and trade policy developments. While the bond market is not yet pricing in aggressive rate cuts, any further signs of economic weakness could push yields lower, supporting gold and silver prices.

Silver Outlook: Further Gains Possible, But Retail Sales Data Adds Uncertainty

Silver’s breakout above $32.65 is technically significant, and the next upside target sits near $34.87. However, Friday’s pullback below $33.00 suggests that economic data will play a key role in determining the next move.

If weaker consumer spending raises concerns about economic growth, traders may start pricing in a more dovish Fed stance, which could weigh on Treasury yields and support silver. Conversely, if inflation pressures persist and the Fed maintains its cautious approach, silver could see further consolidation before resuming its uptrend.

For now, silver remains in a bullish position, but short-term volatility is likely as traders digest the impact of slowing retail sales and shifting rate expectations.

More Information in our Economic Calendar.