Silver (XAG) Forecast: Bullish Outlook Faces Test with Fed Rate Decision

Bulls Defend Key Support After Minor Top Formation

Silver prices demonstrate resilience in Thursday’s trading session, staging a recovery following Wednesday’s substantial sell-off. The recent price action carved out a new minor top at $34.87, falling just short of the significant long-term resistance barrier at $35.40.

A decisive break below $33.42 would confirm the minor top formation, potentially triggering accelerated selling pressure toward the initial support target at $32.52. Despite these short-term correction signals, the broader market structure maintains its bullish characteristics.

At 12:40 GMT, XAG/USD is trading $33.99, up $0.29 or +0.85%.

Bond Market Pullback Lifts Metal Prices

The precious metals complex found support as U.S. Treasury yields underwent a notable decline on Thursday, with the benchmark 10-year yield dropping over 5 basis points to 4.19%. This retreat from Wednesday’s three-month peak has provided a favorable backdrop for silver prices.

The dollar’s simultaneous pullback from recent highs adds another supportive element, though the currency’s overall strength near three-month highs continues to influence trading patterns across precious metals markets.

Rate Cut Timeline Shifts on Fed Comments

Recent commentary from Federal Reserve officials has introduced new complexity into the rate cut timeline. Philadelphia Fed President Patrick Harker’s emphasis on a “slow, methodical approach” to monetary policy adjustments has prompted traders to revise their expectations for aggressive easing.

This policy recalibration ripples through currency markets, notably affecting the Japanese yen, which weakened to 153.19 against the dollar, marking its lowest level since late July.

Institutional Demand Underpins Price Levels

Silver’s impressive 40% gain year-to-date underscores its enduring appeal as a safe-haven asset. The approaching U.S. elections, now just 10 days away, combine with broader geopolitical tensions to maintain steady investment demand. Central banks’ continued substantial bullion purchases provide an additional layer of price support, creating a robust foundation for current price levels.

Rally Momentum Faces Rate Policy Test

ANZ analysts have raised concerns about the sustainability of silver’s recent rally. Their analysis suggests that a more gradual Federal Reserve easing cycle, rather than deep rate cuts, could potentially limit the metal’s upward momentum. However, this view contrasts with the strong fundamental support from institutional buying and safe-haven demand.

Market Forecast

Current market conditions point toward sustained bullish sentiment in the silver market, despite near-term technical warning signs. The established support level at $32.52 should provide a solid foundation, while a breakthrough above $35.40 would confirm the continuation of the upward trend. Traders should maintain focus on the relationship between Treasury yields and dollar strength, as these factors will likely drive short-term price action.

The combination of robust central bank demand and heightened geopolitical uncertainty suggests limited downside risk, although increased volatility may emerge as U.S. election uncertainty intensifies. The market’s ability to hold above key technical levels, coupled with strong institutional buying, indicates potential for further upside movement once the current correction phase concludes.