Silver is showing some encouraging signs after an initially weak start to the session. The metal dropped to a new year-to-date low below the $53 handle, reaching $52.60 before staging a sharp recovery. It has since moved back above yesterday’s high, with the session high so far at $54.55. The resulting price action has been the formation of a hammer candle on the daily at long-term support. The longer-term silver forecast remains bullish due to expectations of strengthening demand for the metal as it is usages increase. Silver is used in solar energy, powers smartphones, laptops, AI data centres, EVs and many other areas.
Silver needs to reclaim summer lows
From a technical analysis perspective, today’s bullish reversal is a positive sign. Now, the metal must reclaim a few important levels. The first hurdle is the July low at $54.77, which silver broke on Thursday. A sustained move back above that level would be an encouraging development for the silver forecast.
More importantly, the metal needs to break above the short-term bearish trend line connecting the recent highs. That would provide a clearer sign that the sequence of lower highs and lower lows on the silver chart is beginning to break down.
If both conditions are met, the case for a more durable recovery would strengthen considerably.
For now, I would treat today’s rebound as an early reversal signal rather than confirmation of a bottom. Silver has reached an important long-term support area and is showing a strong reaction from the lows, but buyers need to demonstrate that they can sustain the recovery.
Silver forecast: Key long-term support being tested
Today’s bullish reversal is potentially significant because silver is showing signs of finding support within the long-term $50–$55 zone highlighted last week. This is an important technical area, with $55 marking the base of the rally that began late last year, while $50 represents a major historical resistance level.
The sharp recovery from today’s low raises the possibility that silver may be trying to form a base. However, it is still too early to call a bottom.
Macro headwinds may limit silver’s upside
The broader environment remains mixed for precious metals. Higher oil prices have revived inflation concerns, potentially limiting the scope for monetary easing and keeping pressure on silver through interest-rate expectations and the dollar.
Although US Treasury yields have retreated from their recent highs, that has yet to provide meaningful relief for precious metals. The dollar has also remained relatively resilient, limiting another potential source of support.
Attention now turns to the Federal Reserve and the signals it provides about the path of interest rates. A hawkish message could provide fresh support for the dollar, which may limit silver’s upside.
Risks skewed to upside for silver forecast
However, silver is not all about the dollar, yields and US monetary policy. If you recall earlier this year, the metal was surging despite rising bond yields and the strength in the dollar. So, I wouldn’t be surprised if the metal were to bottom out soon. Much of the negative factors are already priced in, including the impact of tighter monetary policy. Against that backdrop, you’d feel the risks are clearly skewed to the upside from here on.
