Silver (XAG) Forecast: Technical Analysis Sees Head-and-Shoulders Threat for Silver Market

Silver Pulls Back After Rally: Ceasefire Headlines Hit Safe-Haven Demand

Spot silver (XAG/USD) fell $0.66, or 1.81%, to $35.988 on June 27, breaking its multi-day rally and pulling back from 13-year highs. Despite the dip, silver holds a year-to-date gain of over 20%, reflecting a market recalibration rather than a full trend reversal.

Geopolitical Tensions Ease, Eroding Risk Premium

The primary driver behind the decline was easing geopolitical tensions following ceasefire proceedings between Israel and Iran. Traders pulled back safe-haven positions as Middle East tensions cooled, cutting into silver’s defensive bid that had driven a 30% first-half surge. This change in sentiment removed a key prop for silver’s recent strength, forcing funds to adjust positioning in response to falling geopolitical premiums.

Federal Reserve Stress Tests and Hawkish Tilt Impact Silver

The Federal Reserve’s 2025 bank stress test results showed 22 major U.S. banks holding strong capital positions, reducing financial crisis hedging demand for precious metals. Rate cut expectations also retreated, with only a 25% chance priced for a July cut despite President Trump’s calls for lower rates. Rising real yields made non-yielding silver less attractive, squeezing speculative longs that had bet on deeper Fed easing. Only two policymakers maintained a dovish stance, underlining a less supportive policy environment for precious metals.

Treasury Yields Rise, Offsetting Dollar Weakness

While the Dollar Index (DXY) slipped to 97.254 (-0.10%), the 10-year Treasury yield jumped to 4.275% (+0.68%), enhancing the appeal of fixed-income assets over silver. The higher yield backdrop created an opportunity cost for holding non-yielding metals, prompting capital to rotate toward treasuries despite dollar softness. This yield-led repricing underscored silver’s sensitivity to real interest rates, overshadowing currency movements in driving near-term direction.

Technical Breakdown Sparks Selling

Silver broke key technical support levels, with analysts monitoring a potential head-and-shoulders pattern using $35.25 as the neckline and $33 as the bearish target if confirmed. The gold-silver ratio widened toward 91-94, reflecting silver’s relative weakness. Bearish divergence on lower timeframes suggested the rally’s momentum was stalling, creating a path for corrective selling.

Profit-Taking Caps Rally, But Fundamentals Stay Firm

Systematic profit-taking followed silver’s 30% first-half rally, with COMEX futures showing 1,434 contracts traded and open interest at 25,222 contracts, signaling controlled but persistent liquidation. Yet, supply deficits continue, with the Silver Institute projecting a 149 million ounce shortfall in 2025, the fifth consecutive deficit year. Industrial demand remains robust, crossing 700 million ounces on solar and EV growth.

Market Outlook: A Tactical Pullback in a Bullish Environment

The June 27 decline reflects a tactical pullback driven by ceasefire progress, Fed recalibration, rising yields, technical breaks, and profit-taking. However, structural drivers—tight supply, firm industrial demand, and historically low inventories—remain in place. Analysts see the decline as a healthy consolidation within a broader bull market, positioning silver for a potential renewed advance as underlying fundamentals reassert themselves in the coming sessions.

More Information in our Economic Calendar.