Silver Price Forecast: Weak Nonfarm Payrolls Spark Massive Short-Squeezing Surge Back Above $62

Quick overview

Global commodity derivatives markets took an unexpected, sharp turn at the beginning of the latter half of the year, surprising systematic trend-followers and paper shorts alike. On Monday, July 6, 2026, spot silver (XAG/USD) embarked on a robust, volume-driven trend reversal, surging +2.90% in the late afternoon to close firmly at $62.385/t oz.

The sharp reversal wiped out all the downside technicals from the breakdown in the late-June channel as large commercial traders and automated market makers scrambled to cover short exposure as the convergence of a macroeconomic policy shock and a tightening of underlying physical supply took hold.

U.S. Labor Market Slowdown Triggers 57k Payroll Shock and Softens Greenback

The single most powerful fundamental driver for the bullish reversal in precious metals was the collapse of US job creation velocity in the July 3 Nonfarm Payrolls (NFP) report. The headline data saw the US economy add a measly +57k jobs to June’s payroll count, well below the forecasted +110k and the weakest one-month payroll expansion in more than four months. In addition, the unemployment rate ticked up to 4.2%.

The weak report served to moderate the hawkish tilt of new Federal Reserve Chairman Kevin Warsh, who noted the US economy is still contending with sticky core CPI inflation (at 4.1%), but that broader price pressures and joblessness are coming down as well.

In a joint press briefing, Warsh noted that the Federal Open Market Committee’s price stability mandate is currently on par with the economic environment and no further tightening will be needed at this time. According to the CME FedWatch Tool, the implied probability of an upcoming interest rate hike has collapsed from 66% down to just 50%.

This rapid cooling of rate-tightening fears has caused a decline in US Treasury yields that has sent the Dollar Index (DXY) down to its weakest weekly close since April. Because silver is inversely correlated to the USD on a global basis, the depreciating greenback makes physical silver a cheaper purchase for world allocators, causing a surge of demand for the alternative store of value.

Sixth Annual Structural Deficit Defies Solar Thrifting Fears

The macro backdrop remains as tight as ever. Silver Institute updated figures for its 2026 annual balance sheet showed the commodity in its 6th consecutive year of deficit. Global end-use demand is in the lead, with a shortfall for the entire year of 46.3m t oz.

Silver mining is largely comprised of byproduct metal from copper, lead, and zinc production (72% of total mine output), which means it is not easily increased to take advantage of elevated prices in the short term. Total mine production is expected to remain almost stable at 820 million ounces.

Meanwhile, although paper futures desks sold the metal heavily in June due to fears of a three percent fall in silver usage in solar photovoltaics resulting from the trend for greater material efficiency to 151 million ounces, delivery data paints a different picture. Strong demand by institutional buyers related to new data center construction for the artificial intelligence revolution, high speed 5G technology and electric vehicle charging stations is eating into floating stock levels.

Import demand in China continues to be strong and it is sucking stock out of western exchanges. As a result, it is creating a solid, fundamental foundation of demand that precludes any possibility of a massive collapse over any reasonable time frame.

Silver (XAU/USD) Technical Analysis: High-Volume Rebound Reclaims Triangle and Decimates Short Setup

Now that we have moved away from the central bank interest rate scenario, it is time to take a closer look at what has happened on the spot silver 4-hour chart. Silver has just pulled away from the downside of its recent trading range and broken a major resistance point. The XAG/USD pair surged past the low of its recent trading range at $57.53 and retook the upside of it above $62.385 to trigger a new impulse leg up. This new rally invalidates every single one of the short setups that were set by bears.

By moving back above $62.385 spot silver is back inside of its descending triangle and it has now turned the old downside broken trendline into strong support. The 14-period RSI just moved away from low levels and has risen up to a very strong value of 50.75. In technical terms this just means that the near-term momentum to buy has picked up and that it still has a lot of room to go before getting to the oversold zone. Furthermore, the 9/21 MACD Histogram indicator has just crossed up in a positive direction below the zero line while its histogram bars have started to fill in.

This just confirms what the RSI is indicating, namely that short positions are getting liquidated in order to be re-opened and re-positioned for the new trend move up for the next weekly cycle. The technical setup in spot silver on the 4-hour chart is set up for a continuation leg higher towards its medium term 200 moving average of $65.89.

Conclusion and Trade Idea

The silver market has jumped up into a new rally to cover short positions because the dramatic 57,000 NFP jobs miss completely shifts macro leverage away from the hawkish interest rate projections of the Warsh Fed. Its technicals indicate that the buyers have taken control of the market as they have retook the top of the descending triangle and are retesting the lower triangle point support as they move back higher. Its long-term fundamentals, which involve a large 46.3 million ounce deficit in physical silver and a lot of technology demand, continues to support a strong price move higher.

For our next silver trade, we are looking to set up a long position on any technical pullback and confirmation at the immediate support level of $61.55. We will maintain the buy trade for the short covering bounce to $64.27. We will set a protective stop-loss order at $59.06 as that is just outside of our support at the lower triangle point. We will take a portion off if it breaks $64.27 and we will hold for any breakout higher towards its medium-term 200 moving average of $65.89.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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