FXStreet reports—Silver has broken above the previous high of $60.894 and is now moving toward the 50-day moving average at $62.62. Friday’s non-farm payrolls report will determine whether the dollar sell-off continues to fuel silver’s upward momentum or revives rate hike trades.
CoinMarketCap APP report — In early U.S. trading on Wednesday, August 5, the price of silver surged approximately 5% intraday to around $62.48 per ounce, a rapid rise that cannot be attributed to bargain buying. Traders appear to be actively shorting, a scenario we haven’t seen in a long time. Oil prices dropped amid negotiations over the Iran nuclear deal, causing U.S. Treasury yields to fall as well; the 10-year yield declined to around 4.60% after recently nearing 4.75%. The U.S. dollar also remains weaker due to last week’s intervention in the yen. The simultaneous easing of these three headwinds has propelled silver prices higher.
This is not due to industrial demand or supply shocks. The interest rate trading strategy that had been suppressing silver prices for the past several weeks has now reversed. Following the shift in macroeconomic conditions, sellers who had previously shorted silver have been forced to exit the market, and the current movement appears to be driven first by short covering, followed by new buying.
The risk lies in the fact that each wave of this rally depends on Iran's claims of an agreement that has not yet been reached. If the Strait of Hormuz negotiations collapse, crude oil prices could rise again, reigniting inflation concerns and causing silver prices to decline.
Crude oil prices have long been a hawkish concern for the Federal Reserve regarding inflation. Rising energy prices reinforced expectations for September and pushed yields higher, making it difficult for silver prices to sustain their upward momentum. However, negotiations surrounding the Strait of Hormuz agreement have led to a decline in oil prices, weakening part of this argument.
Analysis of the 10-Year U.S. Government Bond Yield
The 10-year Treasury yield fell from nearly 4.75% to 4.60%, a significant move for silver, which has been trading against rising interest rates for three consecutive weeks. This shift has opened the door for the market. But the market has not calmed down—it is still pricing in the expectation that reduced shipping disruptions could mean lower inflation pressures in the future, enough to push silver prices higher. However, if market expectations reverse, this alone will not be sufficient to sustain its upward momentum.
Iran has denied claims of direct talks with the United States. The so-called "potential agreement" is not a signed deal, and any statements from Tehran could trigger significant volatility in crude oil prices. Silver prices are unlikely to welcome such a reversal.
Long-term U.S. stocks are still declining
Before last week's Fed meeting, the dollar was in high demand with large open interest. The Fed's stance of holding rates steady was not dovish, but it was milder than market expectations. Subsequent yen intervention forced dollar longs to close positions, pushing the US Dollar Index to a six-week low near 99.85.
Silver is being supported by both falling yields and a weaker dollar, which is why its movement is stronger than a typical single-day rebound. If this week’s data performs well, the trend of position unwinding will continue.
The probability of a rate hike in September has decreased from around 67% to approximately 59%. The Fed remains a risk. Kansas City Fed President Jeff Schmid reiterated on Tuesday that tighter monetary policy is needed to bring inflation back to target. However, silver does not currently require a dovish shift from the Fed—it only needs the momentum of tightening to continue weakening, which is precisely what is happening now.
Technical Analysis
(Spot Silver Daily Chart, Source: E-Hui Tong)
After breaking above $60.94, silver ended its prior descending top formation and shifted its primary trend upward. This movement positions silver to test the 50-day moving average at $62.62, a potential resistance level; if buyers break through this average, it could trigger accelerated price gains.
A sustained breakout above the 50-day moving average will indicate strengthening buying pressure. This could push the price to test the next peak, with a target at $63.28. After breaking through that peak, the 200-day moving average ($70.876) will become the key focus.
On the downside, if the price continues to break below the significant 50% retracement level at $60.835, it signals a return of selling pressure. If this generates sufficient downward momentum, the price is expected to retest $58.00 in the short term.
Risk Disclaimer
Silver needs crude oil prices to remain low, yields to stay stable, and the dollar to remain under pressure in order to rise. This week, all three conditions aligned, leading to a rapid increase in silver prices. If any one of these factors reverses, the rally will face challenges.
The Friday jobs report will either continue this trade or end it. Weak job data, especially slowing wage growth, will keep the dollar declining and create room for buyers to move toward the 50-day moving average. Strong job data, particularly robust employment figures, will give Schmid and other hawks exactly what they need, and interest rate trading will resume.
The technical outlook has turned bullish, but buyers are chasing macroeconomic relief rather than a structural shift. As long as economic data maintains its positive momentum, they can sustain the upward drive. Once economic data no longer cooperates, sellers will find a clear entry point.
This is not due to industrial demand or supply shocks. The interest rate trading strategy that had been suppressing silver prices for the past several weeks has now reversed. Following the shift in macroeconomic conditions, sellers who had previously shorted silver have been forced to exit the market, and the current movement appears to be driven first by short covering, followed by new buying.
The risk lies in the fact that each wave of this rally depends on Iran's claims of an agreement that has not yet been reached. If the Strait of Hormuz negotiations collapse, crude oil prices could rise again, reigniting inflation concerns and causing silver prices to decline.
Crude oil prices have long been a hawkish concern for the Federal Reserve regarding inflation. Rising energy prices reinforced expectations for September and pushed yields higher, making it difficult for silver prices to sustain their upward momentum. However, negotiations surrounding the Strait of Hormuz agreement have led to a decline in oil prices, weakening part of this argument.
Analysis of the 10-Year U.S. Government Bond Yield
The 10-year Treasury yield fell from nearly 4.75% to 4.60%, a significant move for silver, which has been trading against rising interest rates for three consecutive weeks. This shift has opened the door for the market. But the market has not calmed down—it is still pricing in the expectation that reduced shipping disruptions could mean lower inflation pressures in the future, enough to push silver prices higher. However, if market expectations reverse, this alone will not be sufficient to sustain its upward momentum.
Iran has denied claims of direct talks with the United States. The so-called "potential agreement" is not a signed deal, and any statements from Tehran could trigger significant volatility in crude oil prices. Silver prices are unlikely to welcome such a reversal.
Long-term U.S. stocks are still declining
Before last week's Fed meeting, the dollar was in high demand with large open interest. The Fed's stance of holding rates steady was not dovish, but it was milder than market expectations. Subsequent yen intervention forced dollar longs to close positions, pushing the US Dollar Index to a six-week low near 99.85.
Silver is being supported by both falling yields and a weaker dollar, which is why its movement is stronger than a typical single-day rebound. If this week’s data performs well, the trend of position unwinding will continue.
The probability of a rate hike in September has decreased from around 67% to approximately 59%. The Fed remains a risk. Kansas City Fed President Jeff Schmid reiterated on Tuesday that tighter monetary policy is needed to bring inflation back to target. However, silver does not currently require a dovish shift from the Fed—it only needs the momentum of tightening to continue weakening, which is precisely what is happening now.
Technical Analysis
(Spot Silver Daily Chart, Source: E-Hui Tong)
After breaking above $60.94, silver ended its prior descending top formation and shifted its primary trend upward. This movement positions silver to test the 50-day moving average at $62.62, a potential resistance level; if buyers break through this average, it could trigger accelerated price gains.
A sustained breakout above the 50-day moving average will indicate strengthening buying pressure. This could push the price to test the next peak, with a target at $63.28. After breaking through that peak, the 200-day moving average ($70.876) will become the key focus.
On the downside, if the price continues to break below the significant 50% retracement level at $60.835, it signals a return of selling pressure. If this generates sufficient downward momentum, the price is expected to retest $58.00 in the short term.
Risk Disclaimer
Silver needs crude oil prices to remain low, yields to stay stable, and the dollar to remain under pressure in order to rise. This week, all three conditions aligned, leading to a rapid increase in silver prices. If any one of these factors reverses, the rally will face challenges.
The Friday jobs report will either continue this trade or end it. Weak job data, especially slowing wage growth, will keep the dollar declining and create room for buyers to move toward the 50-day moving average. Strong job data, particularly robust employment figures, will give Schmid and other hawks exactly what they need, and interest rate trading will resume.
The technical outlook has turned bullish, but buyers are chasing macroeconomic relief rather than a structural shift. As long as economic data maintains its positive momentum, they can sustain the upward drive. Once economic data no longer cooperates, sellers will find a clear entry point.