Silver (XAG) Forecast: Will PCE Inflation Surprise Fuel Silver’s Next Breakout?

Silver Market Recap: Key Drivers and Outlook

Silver experienced notable price swings last week, reaching multi-year highs but ending with a retracement due to profit-taking and a strong U.S. dollar. The metal briefly touched $34.87 on Tuesday, just under the critical $35.40 resistance level, only to pull back by week’s end as traders seized profit opportunities amid rising Treasury yields and dollar strength​​. The 10-year U.S. Treasury yield rose to 4.25%, presenting a headwind for non-yielding assets like silver. Additionally, the dollar marked its fourth consecutive weekly gain, contributing to precious metals’ downside pressure​.

Russia’s Central Bank Purchase Signals Strong Long-Term Support

A standout development came from Russia’s central bank, announcing it would add silver to its reserves for the first time. This diversification effort follows Russia’s established holdings in gold, platinum, and palladium. Analysts view this as a potential long-term demand driver, with Russia’s move signaling institutional support and likely sustained price levels. Projections suggest that central bank accumulation, coupled with industrial demand, could support silver prices well into the coming quarters​​​.

Geopolitical Tensions and Safe-Haven Flows

Global tensions, notably in the Middle East, have bolstered safe-haven demand across the precious metals complex, especially for gold, which silver often follows. Gold reached record highs around $2,758 per ounce as investors turned to safe assets amid geopolitical risks and U.S. election uncertainty​​. These factors sustained investor interest in silver, despite some corrective pressures by week’s end.

Weekly Technical Overview: Key Support and Resistance Levels

For the week, silver’s failure to surpass the multi-year high resistance of $35.40 prompted a wave of selling that pushed it toward support levels. Key support sits around former tops at $32.52 and $31.76, with swing bottom support lower at $30.12. These levels will be closely watched as traders gauge whether silver can consolidate and attempt another move higher or if additional profit-taking will trigger further declines​.

Next Week’s Outlook: Data-Driven Volatility Expected

The week ahead brings several high-impact U.S. economic reports, including GDP, the core PCE deflator, and Non-Farm Payrolls. With expectations of 3% GDP growth and elevated inflation pressures, these metrics will guide expectations around the Federal Reserve’s next rate moves. A robust GDP print could strengthen the dollar and pressurize silver. Conversely, if inflation surprises to the upside, safe-haven flows may renew, especially if labor data indicates economic vulnerabilities​​.

Silver faces potential downside in the short term, especially if support around $32.52 fails, but central bank demand and geopolitical factors remain supportive over the longer term. The dollar and Treasury yields will likely influence immediate price action, with silver positioned to rally if gold holds its momentum and inflation data supports a dovish shift from the Fed. Expect volatility around the key economic releases, with the $35.40 level as a pivotal marker for any bullish breakout.