Silver Price Forecast: XAG/USD trades with caution around $80.50 ahead of Fed’s policy

Silver price demonstrates caution around $80.50 ahead of the Fed’s monetary policy announcement on Wednesday.
The Fed is anticipated to hold interest rates steady in the current range of 3.50%-3.75%.
Heightened geopolitical tensions in the Middle East would continue supporting the Silver price.

Sagar Dua FXStreet

Silver price (XAG/USD) trades cautiously around $80.50 during the European trading session on Tuesday. The white metal wobbles in a tight range as investors shift focus to the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

The Fed is expected to leave interest rates unchanged in the current range of 3.50%-3.75% for the second time in a row amid heightened inflation expectations in the wake of rising oil prices due to conflicts in the Middle East.

According to the CME FedWatch tool, the Fed is also expected to hold interest rates steady for the next four meetings after Wednesday’s interest rate decision.

The scenario of the Fed avoiding any monetary policy adjustment for a longer period bodes poorly for non-yielding assets, such as Silver.

For more cues on the United States (US) interest rate outlook, investors will focus on the Fed’s dot plot and Chairman Jerome Powell’s press conference following the interest rate decision on Wednesday.

Meanwhile, ongoing conflicts between the US, Israel, and Iran are expected to continue offering support to the Silver. Brutal war between these nations is unlikely to de-escalate in the near term as Iran's new Supreme Leader, Mojtaba Khamenei, has rejected peace proposals in the foreign policy session during the day, Reuters reports.

Theoretically, safe-haven assets, such as Silver, perform strongly in a heightened geopolitical environment.

Silver technical analysis

In the 4-hour chart, XAG/USD trades in a Descending Triangle chart pattern around $80.50, which signifies a sharp volatility contraction. The downward-sloping border placed from the March 1 high at $96.62 is capping the upside near $84.00. Meanwhile, the downside has been limited by the horizontal support plotted from the March 3 low around $78.00.

The near-term bias is bearish as price holds beneath the 20-period Exponential Moving Average, which is rolling over near $81.80. The series of lower highs from above $96.00 reinforces a downside structure, while the 14-period RSI wobbles near 40s shows persistent weak momentum without oversold relief, keeping selling pressure in control.

Initial resistance is located at the 20-period EMA near $81.80, followed by the downward-sloping border around $84.00. A sustained break above the latter would challenge the bearish bias and open the way toward the $86.00 area. On the downside, immediate support emerges at $79.00, ahead of the recent trough near $78.50, where a pause in downside momentum would be expected if the RSI dips closer to oversold territory.

(The technical analysis of this story was written with the help of an AI tool.)

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.

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