Silver climbs toward $70 as US Dollar remains under pressure

Silver (XAG/USD) accelerates its advance on Friday and trades around $69.75 at the time of writing, up 2.41% on the day. The white metal reaches its highest level in two months and is on track for a weekly gain of more than 7%, mainly supported by persistent weakness in the US Dollar (USD).

The main catalyst behind Silver’s rally this week is the United States (US) Department of the Treasury’s surprise announcement of its debt buyback program. The Treasury plans to at least double its purchases of longer-dated government securities in an effort to contain borrowing costs. The decision initially triggered a sharp decline in US Treasury yields and the US Dollar, mechanically increasing the appeal of Dollar-denominated precious metals.

US Treasury yields have since recovered some of their losses, but the rebound has not been enough to halt Silver’s advance. Investors appear more concerned about the longer-term implications of US fiscal policy, including rising government debt, large budget deficits and the possibility that authorities may favor looser financial conditions at the expense of the US currency.

Commerzbank argues that the Treasury’s announcement suggests that US authorities may prefer a weaker Dollar rather than accepting persistently higher long-term interest rates. This perception adds a headwind for the Greenback and continues to support Silver.

The monetary policy outlook provides additional support. Recent US employment and inflation data have reduced expectations of an imminent interest rate hike by the Federal Reserve (Fed). Lower interest rates tend to benefit Silver, which offers no yield, while potentially adding further pressure on the US Dollar.

Investors now turn their attention to the preliminary August S&P Global Purchasing Managers Indices (PMIs). The market consensus expects the Manufacturing PMI to ease slightly to 53.8 from 53.9 in July, while the Services PMI is forecast to decline to 54 from 54.6. Weaker-than-expected figures could increase pressure on the US Dollar and provide further support to Silver.

However, inflation risks remain present. Rising Oil prices linked to tensions in the Middle East could keep US inflation elevated and reignite speculation about a Fed rate rise, bolstering the USD. A sustained rebound in US Treasury yields could also become a headwind for precious metals following their strong recent gains.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $69.83, maintaining a bullish near-term bias as price holds above the upward-sloping trend-line support around $68.03 and comfortably above the 100-period simple moving average (SMA) at $66.02 and the 200-period SMA at $65.56. The clustering of underlying levels at $67.75 and $66.60 reinforces a constructive structure, while the Relative Strength Index (RSI) at 70.05 hints at mildly overbought conditions that could slow the advance rather than immediately reverse it.

On the topside, immediate resistance is located at the psychological $70.00 handle, where a sustained break would open the way for further gains in the short term. On the downside, the first meaningful support emerges at the reclaimed trend-line zone near $68.03, followed by horizontal support at $67.75 and $66.60, with the 100-period SMA at $66.02 and the 200-period SMA at $65.56 providing deeper trend support if corrective pressure extends.

(The technical analysis of this story was written with the help of an AI tool. Know more.)