Silver (XAG) Forecast: Bullish or Bearish? Fed Moves to Define Silver Outlook

Silver Prices Edge Higher as Markets Await Fed Decision

Silver prices rose Thursday, coming close to testing a key support level at $30.67 before rebounding to an intraday high near the 50-day moving average of $31.33. Breaking this resistance level could set the stage for a rally toward $32.49, although support from broader market factors, including the Federal Reserve’s interest rate decision and movement in gold prices, would likely be necessary to sustain any significant upward trend.

At 13:01 GMT, XAG/USD is trading $31.34, up $0.16 or +0.52%.

Dollar Softness and Modest Gold Gains Support Precious Metals

Gold recorded modest gains as the U.S. dollar weakened following Donald Trump’s victory in the presidential election. A softer dollar generally makes dollar-denominated commodities like gold and silver more attractive for international buyers. Gold’s mild uptick is providing additional support to silver, with both metals benefiting from increased attractiveness due to the dollar’s decline.

However, the longer-term impact of the new administration’s economic policies remains uncertain. Should Trump’s agenda drive inflation higher, the Fed might opt for prolonged elevated interest rates, which could eventually dampen the appeal of non-yielding assets like gold and silver.

Fed Rate Path Holds Key to Market Sentiment

Markets are focused on the Fed’s decision later today, with a widely anticipated 25-basis-point rate cut that would lower the target range to 4.50%-4.75%. Market forecasts suggest an additional quarter-point reduction in December, followed by a likely pause, with further cuts potentially extending into 2025. Should Fed Chair Jerome Powell signal a dovish stance during his post-meeting comments, this could boost the appeal of precious metals as safe-haven assets amid ongoing economic uncertainty.

U.S. Treasury Yields Reflect Caution on Inflation and Rate Expectations

U.S. Treasury yields showed limited movement Thursday following a post-election rally. The 10-year Treasury yield rose by 2 basis points to 4.449%, while the 2-year yield edged down slightly to 4.262%. Traders remain cautious given inflation concerns tied to potential fiscal expansion, which may push the Fed to maintain elevated rates longer-term. Higher rates would weigh on precious metals by increasing the opportunity cost of holding non-yielding assets.

Economic Data in Focus for Fed’s Rate Path

In addition to the Fed’s decision, markets will closely watch Thursday’s economic data releases, including weekly jobless claims, third-quarter productivity data, and September’s wholesale inventory figures. Indicators pointing to slowing job growth or moderating productivity could support further rate cuts. Such a dovish rate path would likely boost demand for gold and silver as hedges against potential economic volatility.

Market Forecast: Short-Term Bullish on Silver if Resistance is Broken

Given current technical and fundamental signals, silver’s outlook appears cautiously bullish in the near term. A break above the 50-day moving average at $31.33 could enable a rally toward $32.49. However, the Fed’s rate decision and Powell’s commentary will be pivotal. If silver cannot hold momentum above the 50-day average, a retest of the $30.67 support level remains possible, with potential downside if the Fed adopts a more hawkish tone than expected.