Silver Reclaims $70 to Hit Nearly Two-Month High as Monthly Gain Exceeds 20%

TradingKey - On August 28 Eastern Time, international silver prices continued their recent strong rally, with spot silver (XAGUSD) briefly breaking through the key $70 mark intraday, after approaching this level multiple times over the previous several trading sessions. Silver has gained over 20% cumulatively since August, becoming one of the best-performing commodities in recent times.

Silver price daily chart, Source: TradingView

The current rally in silver prices accelerated noticeably starting in mid-to-late August. On August 19, spot silver was still trading around $63 before quickly breaking above $65 and $68, and testing $70 for the first time last week. On August 25, silver reached an intraday high of $69.94, then briefly pulled back to around $68, but buying interest quickly returned, indicating that despite strong resistance around $70, overall market bullish sentiment remains strong.

One of the main drivers behind silver's recent rally is a weaker U.S. dollar and safe-haven demand triggered by the U.S. fiscal outlook. The U.S. Department of the Treasury previously announced an expansion of long-term Treasury buybacks, which temporarily pushed U.S. Treasury yields and the U.S. dollar lower while heightening market concerns over U.S. government debt and fiscal deficits. Consequently, capital flowed back into precious metals such as gold (XAUUSD) and silver.

Meanwhile, gold prices briefly approached $4,700, providing a clear boost to silver as well. Following the broad rally across precious metals, capital began seeking silver for its lower price relative to gold and greater volatility elasticity. As of the Asian trading session on August 28, silver was up about 22% cumulatively in August.

However, $70 remains a crucial short-term price threshold for silver. Silver prices have encountered resistance near this level multiple times recently. Christopher Wong, precious metals strategist at OCBC, noted that a clearer upward extension would be favored only if the U.S. dollar and Treasury yields weaken again and silver can convincingly break above the $70.60 to $72 range.

The market's biggest upcoming variable stems from the Federal Reserve. The latest U.S. core PCE data for July rose 3.7% year-over-year, leaving inflation noticeably above the Fed's 2% target. Market expectations currently price in an approximate 33.7% probability of a rate hike by the Fed in September, while the probability of a rate hike before year-end exceeds 70%. Investors are awaiting Fed Chair Warsh's speech at the Jackson Hole Economic Symposium on Friday for new signals regarding interest rate policy.