Silver climbs toward $70 as US Dollar remains under pressure

Silver's price surged towards $70 on Friday, marking a 2.41% increase for the day, and it has now reached its highest level in two months. The primary driver for this rally is the unexpected announcement by the United States Department of the Treasury regarding a debt buyback program. This initiative aims to reduce borrowing costs by doubling its purchases of longer-dated government securities.

The Treasury's decision initially caused US Treasury yields and the US Dollar to decline, making Dollar-denominated precious metals more attractive. While US Treasury yields have since recovered, Silver's advance has not been halted. Market participants are more concerned about the long-term implications of US fiscal policy, such as growing government debt and large budget deficits, as well as the potential for authorities to favor looser financial conditions over a stronger US currency.

Commerzbank suggests that the Treasury's announcement indicates a possible preference for a weaker Dollar over persistently higher long-term interest rates, which further supports Silver's rally. The monetary policy outlook also provides additional backing. Recent US employment and inflation data have lowered expectations for an imminent interest rate increase by the Federal Reserve, which typically benefits Silver, a non-yielding asset.

Investors are now focusing on the preliminary August S&P Global Purchasing Managers Indices, with expectations of a slight decline in the Manufacturing PMI and a downward revision in the Services PMI. Weaker-than-anticipated figures could intensify pressure on the US Dollar, further bolstering Silver's prospects. However, inflation concerns persist, as rising oil prices due to Middle East tensions could maintain elevated US inflation levels and reignite speculation about a Fed rate hike, which would strengthen the US Dollar.

A persistent rise in US Treasury yields could pose a headwind for precious metals following their recent strong gains. The one-hour chart shows XAG/USD at $69.83, maintaining a bullish near-term bias as it remains above the upward-sloping trend-line support around $68.03 and above both the 100-period and 200-period simple moving averages.

The Relative Strength Index stands at 70.05, indicating mildly overbought conditions that might slow the advance rather than immediately reverse it. Immediate resistance is at the psychological $70.00 level, with further gains possible if this level is surpassed. On the downside, support can be found at the reclaimed trend-line zone near $68.03 and horizontal support at $67.75 and $66.60, with deeper trend support provided by the 100-period SMA at $66.02 and the 200-period SMA at $65.56.