Silver (XAG) Forecast: Is a Shift in Fed Policy the Catalyst Silver Needs in 2025?

Silver Posts Modest Gains, Tracks Gold and Dollar Moves

Silver (XAG/USD) settled at $29.65 on Monday, rising $0.14 (+0.47%) in thin holiday trading. Price action remains muted as silver mirrors gold’s struggle for direction, with broader market sentiment shaped by the strength of the U.S. dollar and Treasury yields.

Technical Outlook- Direction Controlled by 200-Day Moving Average

Silver is testing the 200-day moving average around $29.69, a critical level that could determine near-term price action. Immediate support lies at $29.64 and $29.68, while resistance emerges at $31.47, marked by the 50-day moving average. A break above this zone could open the path toward the recent high of $32.33. Conversely, failure to hold the $28.74 level risks a retest of $27.71.

Silver’s inability to decisively break resistance reflects broader market caution. The moving averages highlight a bearish trend in the short term, with lower highs reinforcing downward pressure. Any sustained rally will require stronger volumes, which are unlikely until the new year.

Fundamental Drivers – Short-Term Headwinds

Silver’s short-term outlook aligns with gold, which remains under pressure following the Federal Reserve’s policy announcement on December 18. Although the Fed cut rates by 25 basis points, it forecasted only two rate cuts in 2025, down from four earlier projections​. This shift triggered selling across the precious metals market, as higher rates diminish the appeal of non-yielding assets like silver.

Additionally, the U.S. dollar index (DXY) climbed to 108.05, buoyed by diverging monetary policies between the Fed and other global central banks​. Rising Treasury yields reinforced this trend, with the 10-year yield at 4.586%. Higher yields increase the opportunity cost of holding silver, further pressuring prices.

Long-Term Prospects – Tailwinds from Economic and Political Uncertainty

Despite short-term challenges, silver’s longer-term outlook remains positive. UBS projects gold could reach $2800 by mid-2025, driven by inflation concerns, geopolitical risks, and potential rate cuts​. Silver, often moving in tandem with gold, could benefit from similar safe-haven demand. This could send silver back to the $34.35 to $35.40 area.

Additionally, U.S. political uncertainty, including the 2024 presidential race, may introduce volatility, increasing silver’s appeal as a hedge against instability. If the Fed signals more aggressive rate cuts later in 2025, silver prices could rally in anticipation of easier monetary conditions.

Forecast – Range-Bound with Breakout Potential

In the near term, silver is likely to trade between $28.74 and $31.47, constrained by low liquidity and cautious sentiment, due to Federal Reserve policy uncertainty. Traders should watch the dollar’s performance and economic data for clues on the Fed’s next moves, as these factors will drive silver’s next significant breakout.

More Information in our Economic Calendar.