Silver (XAG) Forecast: Market Cautious as PCE Report Looms—Is Silver Dropping Further?

Silver Slips for Third Straight Session

Silver prices are trading lower for the third consecutive session on Tuesday, currently within a major retracement zone between $31.81 and $32.53.

The metal has struggled to gain upward momentum, with substantial resistance at $33.21 and $33.39.

If silver fails to hold the $31.81 support level, a deeper decline could unfold, potentially testing the 50-day moving average at $30.85 and, in a more bearish scenario, the 200-day moving average at $30.51​.

At 12:38 GMT, XAG/USD is trading $31.83, down $0.52 or -1.60%.

Gold’s Influence Remains Key for Silver

Gold prices are trading just below Monday’s record high of $2,956.31, with traders eyeing a potential test of the $3,000 mark. While gold’s primary uptrend remains solid, a pullback to $2,864.33 could shift momentum to the downside.

Given silver’s historical tendency to follow gold’s lead, a strong performance in gold could provide support for silver prices, whereas any weakness in gold might exacerbate silver’s recent slide​.

Treasury Yield Sell-Off Provides Some Relief

The ongoing sell-off in U.S. Treasury yields, with the 10-year yield at 4.402% and the 2-year at 4.175%, is offering modest support to silver. Lower yields reduce the opportunity cost of holding non-yielding assets like silver, which could help cushion against further losses.

However, the strength of the U.S. dollar remains a critical factor, as a stronger dollar may weigh on silver prices by making it more expensive for international buyers​.

Traders Brace for Friday’s PCE Report

The U.S. Personal Consumption Expenditures (PCE) report, due Friday, is likely to be a pivotal event for silver traders. As the Federal Reserve’s preferred inflation gauge, this data could influence expectations for future interest rate moves. Higher-than-expected inflation could lead to a more hawkish Fed stance, which may pressure silver and other non-yielding assets​.

Market Forecast: Cautious Outlook for Silver

Silver’s short-term outlook remains cautious, with the market needing a break above $32.53 to generate fresh buying interest. However, strong resistance near $33.39 could limit gains.

On the downside, a breach of the $31.81 level might trigger an acceleration toward the 50-day moving average at $30.85, with a potential extension to $30.51 if bearish momentum builds.

Traders should closely monitor gold’s performance, the U.S. dollar’s movements, and Friday’s PCE report for cues on silver’s next direction.

More Information in our Economic Calendar.