Silver (XAG) Forecast: Could Fed Policy Clarity Spark a Rally or Trigger a Retreat?

Inflation Data Influences Mixed Price Trends

Silver prices fell this week, settling at $30.56, a decline of 1.33%, as markets processed U.S. inflation data, stronger Treasury yields, and a firming U.S. dollar. Investors are positioning cautiously ahead of the Federal Reserve’s December meeting.

Technically, XAG/USD is being held in check by the $30.44 to $32.26 trading range. The longer the market remains in this trading range, the greater the potential for a powerful breakout. As of Friday’s close, the bias for this breakout is to the downside.

Inflation and Fed Expectations Shape Sentiment

November’s Consumer Price Index (CPI) showed a 2.7% annual increase, with core inflation at 3.3%, matching market expectations. The Producer Price Index (PPI) indicated a 3% year-over-year rise, reinforcing hopes that inflation pressures are easing gradually. These reports solidified the likelihood of a 25-basis-point rate cut at the Federal Reserve’s meeting next week, the third reduction this year​​.

However, inflation remains above the Federal Reserve’s 2% target, signaling a potential pause in aggressive easing in 2024. Market participants are awaiting fresh guidance on the Fed’s outlook for 2025, adding to uncertainty.

Dollar Strength and Treasury Yields Add Pressure

A stronger U.S. dollar, buoyed by its best weekly performance in a month, weighed on silver prices. Rising Treasury yields also created challenges, as the 10-year yield climbed to 4.40%. These factors increase the appeal of interest-bearing assets over silver​​.

Safe-Haven Demand Provides Support, but Industrial Weakness Limits Gains

Geopolitical uncertainties, including ceasefire discussions in Gaza, supported silver’s safe-haven appeal. However, global industrial demand for silver remained muted, limiting upward price momentum. Central banks have prioritized gold purchases, further constraining silver’s gains​​.

Silver Ends Lower as Inflation Data and Fed Uncertainty Loom

The silver market settled lower as it struggled to build momentum despite a supportive macroeconomic backdrop. Investors remain cautious, focusing on upcoming economic data and Federal Reserve signals for clearer direction.

Next Week’s Forecast: Fed Meeting and PCE Data in Focus

All eyes will be on the Federal Reserve meeting on December 17–18, where a 25-basis-point rate cut is widely expected. The accompanying Summary of Economic Projections and comments from Chair Jerome Powell will be crucial for understanding how the Fed plans to balance inflation risks and growth in 2025​.

In addition, the Personal Consumption Expenditures (PCE) Price Index, due later in the week, will provide critical insight into inflation trends. A reading consistent with CPI and PPI could reinforce expectations for a cautious Fed stance, limiting the possibility of aggressive rate cuts next year.

Silver prices will likely respond to any shifts in interest rate expectations and inflation data. The market may find support from ongoing geopolitical uncertainties and safe-haven buying. However, a strong dollar and elevated Treasury yields could continue to act as headwinds.

Investors should monitor these developments closely, as silver prices remain sensitive to macroeconomic trends and Federal Reserve policy updates.

More Information in our Economic Calendar.