Silver (XAG/USD) extended its rally into a fourth consecutive session on Friday, surging to a fresh 14-year high. Spot prices traded near $39.85 at the time of writing, breaking above the July 23 peak of $39.53 as persistent US Dollar (USD) weakness and strong safe-haven demand kept bullish momentum firmly intact.
Fed policy outlook and macro backdrop
The rally comes as markets continue to anticipate a September rate cut from the Federal Reserve (Fed), despite mixed signals from inflation data. July’s core Personal Consumption Expenditures (PCE) index climbed to 2.9% year-over-year, its highest reading in five months, while headline PCE remained steady at 2.6%. The stronger core reading complicates the inflation picture, but traders are increasingly focused on labor market data, where slowing job growth and softer wages pose a larger risk to the economy.
Swaps markets currently price in an 87% probability of a September rate cut, underscoring the dovish shift in expectations. Meanwhile, broader drivers—including a weaker USD, geopolitical uncertainty, and firm industrial demand from solar and green energy sectors—are adding fuel to silver’s rally.
Political tension weighs on Fed credibility
Adding to the backdrop, concerns over the Fed’s independence intensified after US President Donald Trump moved to dismiss Fed Governor Lisa Cook over allegations of mortgage fraud. Cook has filed a lawsuit seeking an injunction to block the decision, marking an unprecedented legal battle over the central bank’s autonomy. The controversy has unsettled investor confidence in monetary policy and further pressured the USD, reinforcing flows into safe-haven assets such as silver.
Technical outlook for XAG/USD
Silver’s decisive break above $39.50 has tilted the near-term bias higher, with bulls now eyeing the key $40.00 psychological barrier. On the 4-hour chart, XAG/USD remains well above the 100-period Exponential Moving Average (EMA) at $38.35, while the Relative Strength Index (RSI) hovers around 74 in overbought territory, reflecting strong but stretched momentum.
A sustained push through $40.00 would open the door toward the September 2011 highs, with $41.48 and $43.40 serving as the next upside targets. On the downside, initial support is seen at $39.00, followed by the 100-period EMA at $38.35, which should act as a pivotal zone for bulls.
