Silver (XAG) Forecast: Traders Eye $32.49 Support as Price Retreats from Highs

Silver Prices Drop as Profit-Taking Pulls Market Lower

Silver prices dipped on Friday, capping off a week marked by a strong three-day sell-off, with Friday’s closing pointing toward additional pressure in the near term. After reaching a 12-year high at $34.87 on Tuesday, the silver market has struggled to maintain upward momentum, triggering profit-taking and positioning the metal into a correction mode.

Failure to surpass the next major resistance level at $35.40 gave traders the green light to lock in profits, pushing silver back down to test key support levels. Currently, the $32.49 level is a short-term pivot, with the 50-day moving average at $30.75 serving as the next downside target.

At 14:14 GMT, XAG/USD is trading $33.46, down $0.21 or -0.63%.

Gold Declines on Profit-Taking but Maintains Support from Middle East Tensions

Gold also saw a decline on Friday as investors took profits following its record-setting rally earlier in the week. Despite the pullback, ongoing geopolitical tensions in the Middle East—specifically, hostilities in Lebanon—provided underlying support, keeping the metal from further losses. U.S. Secretary of State Antony Blinken emphasized the urgency of reaching a diplomatic solution in the region, which kept gold prices buoyant.

Looking forward, traders are focused on upcoming U.S. inflation and economic data releases, seeking further insight into the economy’s stability and potential shifts in monetary policy.

Treasury Yields and Fed Commentary Impact Precious Metals Sentiment

In bond markets, the 10-year Treasury yield held steady on Friday, following a week where it breached a three-month high at 4.25%. The U.S. 2-year Treasury yield also remained little changed at 4.064%, reflecting a cautious stance by investors.

Federal Reserve policymakers have struck a measured tone this week, with Cleveland Fed’s Beth Hammack suggesting that caution is warranted in the ongoing battle against inflation.

While there is a 97% probability of a 25 basis-point rate cut in November, according to the CME FedWatch Tool, policymakers have indicated a slower pace in future cuts. This cautious approach on rates has influenced demand for precious metals, as changes in interest rates typically impact non-yielding assets like silver and gold.

Dollar Gains for Fourth Consecutive Week Amid Global Uncertainty

The U.S. dollar held firm this week, securing its fourth straight weekly gain. This resilience reflects investor caution around an array of risks, including an upcoming Japanese election and global economic instability, with volatility in currency options spiking as traders hedge against the uncertainties.

The dollar’s strength, driven by the prospect of fewer rate cuts from the Federal Reserve, has put additional pressure on silver and gold prices, which often move inversely to the dollar.

Market Forecast

With silver’s recent rally losing steam, the market appears primed for further downside in the short term, as traders continue booking profits and reacting to broader macroeconomic pressures. Unless silver manages to hold the $32.49 pivot, the next stop at the 50-day moving average of $30.75 could become the key support level to watch.

Meanwhile, gold prices could remain sensitive to Middle East developments and upcoming U.S. economic data, with any significant uptick in inflation likely to provide renewed support. In the near term, traders should brace for potential volatility across precious metals, with both silver and gold positioned to react to evolving geopolitical and economic cues.