Silver (XAG) Forecast: Will Powell’s Speech Spark a Breakout Above $30?

Silver Market Recap: Strong Finish, but Challenges Ahead

Silver (XAG/USD) outperformed gold last week, posting an impressive 5.77% gain. This robust performance was driven by a weakening U.S. dollar and heightened geopolitical tensions, which increased demand for safe-haven assets. Gold also surged to a record high, reflecting broad investor interest in precious metals during uncertain times.

The U.S. Consumer Price Index (CPI) data, showing a moderation in inflation, fueled expectations of a potential Federal Reserve rate cut in September. This prospect provided additional support for silver, as lower interest rates typically weaken the dollar, making non-yielding assets like silver more attractive.

Dollar Weakness and Key Technical Levels

 

The U.S. dollar’s decline, marking its fourth consecutive week of losses, significantly bolstered silver’s performance. The dollar index dropped by 0.62%, enhancing silver’s appeal to international buyers. U.S. Treasury yields also fell, with the 10-year yield at 3.883% and the 2-year yield at 4.052%, further supporting silver prices.

On the technical front, silver faced potential resistance on the weekly chart between $29.04 and $29.50. However, a breakout above this range could trigger an acceleration to the upside, with the psychological $30 level as the first target. Beyond this, silver could aim for higher levels, including previous tops at $31.76 and $32.52. The weekly close above $28.00 is a strong indicator that silver may challenge these levels if supportive factors persist.

China’s Weak Demand Could Cap Gains

Despite these positive developments, silver’s rally could be limited by weak industrial demand from China, the world’s largest consumer of the metal. Recent Chinese economic data, including slower industrial output and mixed retail sales, suggest that demand may remain subdued. This weak demand could cap silver’s gains, even as other factors, such as a weaker dollar and supportive technical signals, remain favorable.

The ongoing lack of strong demand from China, especially in key sectors like manufacturing and electronics, is a significant concern. Without a substantial recovery in Chinese demand, silver might struggle to break through its resistance levels and sustain its upward momentum.

Outlook: Focus on Powell’s Speech and Breakout Levels

Looking ahead, Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium will be crucial for silver’s near-term direction. Traders will be watching closely for signals of a potential rate cut, which could further drive silver prices higher.

Additionally, silver’s ability to break through the $29.04 to $29.50 resistance range and hold above the 50-day moving average will be key to determining its future performance. While the outlook remains cautiously optimistic, the weak demand from China could temper any significant rallies.