Silver surges as Treasury buyback plan sinks the US Dollar

Silver prices surged sharply on Wednesday, reaching near $65.80 per ounce. This increase came as a result of the United States Department of the Treasury announcing it would double the size of its liquidity support buyback operations for longer-term, coupon securities, starting on September 9th. The strategy aimed to curb the recent spike in long-end yields, and it succeeded in doing so.

Another significant factor in Wednesday's market movement was the release of the July Federal Open Market Committee (FOMC) Minutes. These minutes indicated that policy makers continued to view inflation as elevated, while the labor market remained stable and the economy was expanding. The announcement also revealed that three Federal Reserve regional presidents - Lorie Logan, Beth Hammack, and Neel Kashkari - voted in favor of raising interest rates.

However, the release of the FOMC Minutes failed to significantly alter market sentiment, as traders considered the content to be backward-looking. The discussion at the meeting took place before the release of softer July inflation data and a weak jobs report, which showed a 23,000 decline in payrolls. Consequently, the probability of a September rate hike dropped to 34%, down from around 60% three weeks prior.

The primary focus shifted to a more likely scenario of no rate hike, which kept the market environment favorable for precious metals. On the 4-hour chart, the price of silver (XAG/USD) stood at $65.77, maintaining an optimistic short-term outlook as it remained above both the 20-period Simple Moving Average (SMA) at $64.84 and the 100-period SMA at $62.16.

These moving averages provided support for the uptrend, while the Relative Strength Index (RSI) at 58 indicated positive momentum without reaching overbought conditions. Should silver prices break above the immediate resistance level at $65.92, it could potentially trigger a further advancement. Conversely, if the price falls below $65.29, it would signal a shift in momentum, with deeper support found at the 20-period SMA at $64.84, along with other resistance and support levels such as $63.83, $63.54, and the 100-period SMA near $62.16.