Silver Price Forecast: XAG/USD extends recovery near $30 despite Fed supports fewer rate cuts

Silver price recovers further to near $29.90 even though US bond yields rise as Fed officials support fewer interest rate cuts in 2025.
Soft monthly US PCE inflation raised uncertainty over the Fed's shallow rate-cut path.
Silver price is expected to struggle in an attempt to extend the upward-sloping trendline above $30.00.

Sagar Dua FXStreet

Silver price (XAG/USD) extends Friday’s recovery move to near $29.90 in Monday’s European session. The white metal rebounded strongly on Friday from a more than three-month low of $28.75 after the release of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for November, which showed that price pressures grew at a slower pace than expectations.

Core PCE inflation, the Federal Reserve’s (Fed) preferred inflation gauge, rose steadily by 2.8% but slower than estimates of 2.9%. The month-on-month headline and core PCE inflation grew marginally by 0.1%, raising uncertainty over whether the Fed will follow a shallow rate-cut path in 2025, as projected in the Fed’s dot plot from the December policy meeting.

The recent Fed dot plot showed that officials collectively see Federal Fund rates heading to 3.9% by the end of 2025.

Silver prices advanced on Monday even though US Treasury yields remain higher as Federal Reserve (Fed) policymakers support fewer interest rate cuts next year. 10-year US Treasury yields moved higher to near 4.54%. Generally, higher yields on interest-bearing assets weigh on non-yielding assets, such as Silver, as they result in higher opportunity costs for them. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticked higher to near 108.00.

On Friday, a string of Fed officials backed a shallow policy-easing approach amid a slowdown in the disinflation trend, better labor market conditions than previously anticipated, and uncertainty over President-elect Donald Trump's incoming policies.

Silver technical analysis

Silver price recovers to test the breakdown of the upward-sloping trendline near $30.00, which is plotted from the February 29 low of $22.30 on a daily timeframe. The white metal wobbles around the 200-day Exponential Moving Average (EMA), suggesting that the longer-term outlook is uncertain.

The 14-day Relative Strength Index (RSI) rebounds to near 40.00. A fresh bearish momentum would trigger if it fails to break above that level.

Looking down, the September low of $27.75 would act as key support for the Silver price. On the upside, the 50-day EMA around $30.90 would be the barrier.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD picks up extra pace north of 1.1400

EUR/USD extends its recovery past 1.1400 the figure as the NA session draws to a close on Monday. Indeed, the pair advances for the third straight day amid the persistent offered bias in the US Dollar. Meanwhile, market participants keep gearing up for the ECB Forum in Sintra and the release of critical US labour market data.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Strategy unveils plan allowing Bitcoin sales to fund stock buybacks, dividends and reserves

Strategy (MSTR) has unveiled a Digital Credit Framework to strengthen the company’s financial standing. Under the new framework, the world’s largest corporate holder of Bitcoin (BTC) will pivot from its previous accumulation strategy, opting to sell BTC in order to boost liquidity, fund dividend payments, execute stock buybacks, and strengthen cash reserves.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.