Silver (XAG) Forecast: Fed Influence Wanes, Traders Turn to Jobs and Inflation Data

Will the Fed’s Hawkish Stance Keep Silver Prices Down?

Silver ended the week at $29.51, falling 3.41% as prices broke below key support levels. A combination of Federal Reserve policy signals, rising Treasury yields, and dollar strength drove bearish sentiment, leading to heavy selling throughout the week.

Why Did Silver Break Down This Week?

Silver’s decline accelerated when prices dropped below the $30.44 pivot early in the week, triggering a wave of selling that pushed the metal under $29.64. This critical level gave way, sending prices to a low of $28.75 before rebounding slightly to close near $29.51. The breakdown below these important markers reflects market uncertainty and reinforces bearish conditions.

How Did the Fed and Treasury Yields Impact Silver?

The Federal Reserve’s cautious approach to rate cuts weighed heavily on silver. Fed Chair Jerome Powell signaled that only two rate cuts are expected in 2025, compared to earlier forecasts of four. This pushed the 10-year Treasury yield to 4.57% during the week, before easing to 4.526% by the close. Rising yields increase the cost of holding non-yielding assets like silver, reducing investor demand.

Could Cooling Inflation Have Helped Silver?

Even though inflation data showed signs of slowing, silver did not benefit. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure, rose by 0.1% in November, bringing the annual rate to 2.4%, slightly below projections. Despite this, inflation remains above the Fed’s 2% target, which has kept policymakers focused on maintaining higher rates. This limited any upside for silver.

Why Didn’t Geopolitical Risks Boost Silver’s Appeal?

Although geopolitical risks, including the possibility of a U.S. government shutdown, have persisted, silver has not attracted strong safe-haven demand. Market attention remained fixed on economic conditions, particularly the Fed’s policy path and the resulting strength of the dollar and Treasury yields. This suggests economic concerns are currently driving silver more than geopolitical uncertainties.

Short-Term Outlook: What’s Next for Silver After the Holidays?

Silver’s near-term outlook remains bearish, with prices struggling to climb back above $30. A retest of the $29.64 support zone is likely, with potential for further losses toward $26.47 to $26.02 if selling pressure increases. Resistance is firm at $30.44, and any price recovery will depend on upcoming economic data and possible changes in the Fed’s stance.

With the Fed’s recent decisions now behind the market, silver’s direction will be shaped by incoming economic reports. After the Christmas and New Year holidays, traders will focus on U.S. jobs data and inflation figures to anticipate the Fed’s next move. These indicators will influence Treasury yields and the dollar, which in turn will play a significant role in silver’s price action.

More Information in our Economic Calendar.