Silver (XAG) Forecast: Downward Pressure Builds—Will Prices Drop Below $30.88?

Silver Drops for Second Straight Session as Downside Momentum Looms

Silver prices declined for a second consecutive session on Tuesday, reflecting growing pressure from technical levels. Despite the recent dip, the primary trend remains upward for now, but traders are closely monitoring key support levels that could signal a shift in momentum.

At 12:26 GMT, XAG/USD is trading $31.39, down $0.29 or -0.92%.

Key Levels for Silver

Currently, silver is testing support, and a break below $30.88 would shift the main trend to the downside. Such a move could trigger an acceleration toward the 50-day moving average, which sits at $29.57. If selling pressure builds, further downside action could be expected. The breach of this support level would likely intensify bearish sentiment, especially if accompanied by increased selling volume.

Although gold prices have seen choppy trading due to a weaker U.S. dollar and falling Treasury yields, silver has not benefited from the same upward pressure. In fact, ongoing market uncertainty, compounded by geopolitical tensions, is keeping silver under pressure, while traders await clearer signals from the Federal Reserve regarding interest rates.

Impact of Treasury Yields and Federal Reserve Policy

Declining U.S. Treasury yields have given some relief to precious metals, but silver has not mirrored gold’s relatively resilient performance. The yield on the 10-year Treasury note has fallen to 4.02%, reversing from recent highs, which typically provides some upside for non-yielding assets like silver. However, the market’s focus remains on the Federal Reserve’s next policy moves, especially after Fed Governor Adriana Kugler’s comments on the resilient U.S. labor market. This resilience suggests that rate cuts may not come as soon as previously expected, limiting the appeal of silver in the short term.

The CME FedWatch tool currently shows that investors are pricing in a smaller chance of a significant rate cut, expecting a more cautious 25-basis-point reduction at the Fed’s November meeting. This restrained outlook is tempering bullish sentiment in the silver market, as higher interest rates tend to strengthen the U.S. dollar, making silver less attractive to investors.

Geopolitical Concerns and Physical Demand Weakness

While geopolitical tensions, particularly in the Middle East, continue to support safe-haven demand for gold, silver has not experienced the same level of investor interest. Silver’s price action remains more vulnerable to physical demand shifts, which have been notably weaker, particularly in China, the largest consumer of industrial silver. With China’s central bank holding off on increasing its reserves for a fifth month, and local prices trading at a discount, global demand for physical silver remains muted.

Silver Market Forecast

In the near term, silver could face increased downside risk, especially if it breaks below the key $30.88 level. A failure to hold above this threshold could accelerate selling toward the 50-day moving average at $29.57.

While the overall trend remains up, any continued weakness in physical demand or further signals of tightening U.S. monetary policy may weigh on silver prices. Traders should monitor Fed updates and geopolitical developments closely, as these factors will likely shape silver’s next move.