Silver Surges Past $70 as Dollar Weakens and Safe-Haven Demand Escalates
Silver prices have been on a tear lately, hitting nearly a two-month high of $70 on August 28 Eastern Time. The spot silver price (XAGUSD) briefly broke through this key level intraday after approaching it multiple times previously. Since August, silver has gained over 20% cumulatively, making it one of the best-performing commodities in recent times.
The rally in silver prices accelerated noticeably starting in mid-to-late August. On August 19, spot silver was trading around $63 before quickly breaking above $65 and $68, and testing $70 for the first time last week. 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 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.
As a result, capital flowed back into precious metals such as gold (XAUUSD) and silver. 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.
However, $70 remains a crucial short-term price threshold for silver. Silver prices have encountered resistance near this level multiple times recently. According to Christopher Wong, precious metals strategist at OCBC, 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.