Silver tests $65: Why are buyers struggling to extend the rally?
- Silver consolidates after surging more than 10% last week as Fed rate hike bets ease.
- Traders await US CPI data for fresh clues on the Fed’s interest rate path.
- A daily close above $65 would expose the 100-day SMA near $69.
Silver (XAG/USD) struggles to extend its gains on Monday following last week’s strong breakout as traders assess the Federal Reserve’s (Fed) interest rate outlook amid risks on both sides of its dual mandate. The United States (US) labour market is showing signs of weakness, while inflation risks remain tilted to the upside. At the time of writing, XAG/USD trades around $64, with the $65 psychological mark acting as a firm ceiling.
The white metal climbed to its highest level since June 23 last week after weaker-than-expected US Nonfarm Payrolls (NFP) data prompted traders to scale back expectations for a September Fed rate hike. According to the CME FedWatch Tool, the probability of a rate hike now stands below 50%.
Meanwhile, uncertainty over the reopening of the Strait of Hormuz keeps energy-driven inflation risks in focus, even as Iran and Oman say they are close to finalising an agreement.
Traders now await Wednesday’s US Consumer Price Index (CPI) data, which could provide the next major catalyst and determine whether Silver breaks above $65 or loses momentum. A softer-than-expected reading could further reduce Fed rate hike bets and support the non-yielding metal. Conversely, hotter inflation could revive expectations for a rate increase.
Technical analysis
XAG/USD is in recovery mode after forming a double-bottom pattern near the $55 region and reclaiming the 21-day and 50-day Simple Moving Averages (SMAs). The latest leg higher pushed Silver toward $65, a level that previously acted as support but has now turned into resistance, capping immediate upside attempts.
Momentum indicators support the bullish outlook. The Relative Strength Index (RSI) on the daily chart holds around 61, while the positive and expanding Moving Average Convergence Divergence (MACD) histogram suggests the recovery is gaining strength. A decisive daily close above $65 would expose the 100-day SMA near $69, with the $75 level emerging as the next major hurdle.
On the downside, the 50-day SMA near $62 offers initial support, followed by the 21-day SMA around $59. A break below the latter would weaken the recovery and bring the $55 double-bottom region back into focus.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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