Silver Price Forecast: XAG/USD rally hits pause below $90 as traders price out dovish Fed bets
- Silver price consolidates around $87 after its rally hits a pause.
- The Fed is unlikely to cut interest rates this year.
- Investors await US President Trump’s comments after meeting with Chinese leader Xi.
Silver price (XAG/USD) trades calmly near $87 during the European trading session on Thursday. The white metal turns sideways after failing to extend its almost two-month-long advance above $90.00 on Wednesday.
The precious metal’s rally hits a pause as traders have priced out the expectations of an interest rate cut by the Federal Reserve (Fed) this year.
According to the CME FedWatch tool, the odds of the Fed delivering an interest rate cut this year are just 1%, while the possibility of holding them steady and raising is 66.8% and 32.2%, respectively.
Traders pare dovish Fed after the release of the United States (US) Consumer Price Index (CPI) data on Tuesday, which showed that the headline inflation accelerated to 3.8% Year-on-Year (YoY) in April from the previous reading of 3.3%.
The odds of the Fed hiking interest rates this year were nil a month ago, the CME FedWatch tool shows.
Theoretically, the scenario of the Fed advocating a “long hold” or increasing interest rates bodes poorly for non-yielding assets, such as Silver.
Meanwhile, investors await comments from US President Donald Trump after the meeting with Chinese leader Xi Jinping.
Silver technical analysis
XAG/USD trades almost flat at around $87 as of writing. The white metal maintains a clear bullish bias as price holds well above the 20-day exponential moving average (EMA) at $79.66. The short-term uptrend remains intact, and the Relative Strength Index (RSI) near 68 hints at strong but increasingly stretched upside momentum, suggesting the metal could be nearing overbought territory even as buyers stay in control.
On the downside, initial support emerges at the 20-day EMA around $79.66, which underpins the broader advance and would need to give way to indicate a deeper corrective phase. As long as XAG/USD holds above this dynamic floor, dips are likely to be viewed as corrective within the prevailing uptrend, with momentum conditions arguing that any consolidation could be shallow before buyers attempt to extend gains further.
Looking up, the Silver price could extend its advance towards the March 2 high of $96.62 if it manages a decisive breakout above $90.00.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
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.
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.
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.
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.
