Silver (XAG) Forecast: Is the Fed’s Inflation Outlook the Catalyst Silver Bulls Need?

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Updated: Jan 26, 2025, 08:54 GMT+00:00

Key Points:

Silver closed at $30.59, holding the bullish $30.44 pivot. Can Fed policy shifts and China’s outlook drive a breakout above $31?
A decisive breakout above $31.00 could target $31.81–$32.33, but failure to hold $30.44 risks a drop to $29.86.
Traders eye Fed meeting this week. Powell’s inflation stance and dollar moves may impact silver’s near-term direction.
China’s tariff policies and infrastructure plans are crucial. Industrial silver demand hinges on Beijing's next economic moves.
Gold’s rally supports silver, but gains lag due to weaker industrial demand and uncertainty in renewable energy growth.

Why Did Silver Struggle to Break $31.00?

Silver prices closed last week at $30.59, up 0.80%, managing to stay on the bullish side of the $30.44 pivot, which now controls the market’s direction on the weekly chart. While the metal briefly traded above $31.00, it failed to sustain momentum, underscoring traders’ hesitation despite a supportive macro backdrop.

The uncertainty stems largely from mixed signals in industrial demand. China, the world’s largest silver consumer, remains a focal point, with speculation about tariff reductions and infrastructure investments offering hope for demand growth.

However, Beijing has yet to deliver clear policy announcements, leaving the market in a wait-and-see mode. Meanwhile, the U.S. renewable energy sector, a significant driver of silver demand through solar panel production, faces uncertainty tied to potential shifts in government funding.

Can Gold’s Strength Keep Supporting Silver?

Weekly Gold (XAU/USD)

Gold’s push toward record highs last week lent indirect support to silver. A weaker U.S. dollar, which declined 1.77%, and falling Treasury yields fueled gold’s rally and created favorable conditions for silver as a cheaper alternative for international buyers.

However, silver’s dual role as both a safe haven and an industrial metal has limited its gains. Unlike gold, which has rallied purely on inflationary concerns and risk aversion, silver’s reliance on global economic activity left it struggling for stronger momentum.

What Could Drive Silver This Week?

The upcoming Federal Reserve policy meeting is the primary focus for traders. While a rate cut is not expected, Chair Powell’s comments could shift the dollar and Treasury yields, potentially impacting silver prices. Key U.S. economic data, including Q4 GDP and the PCE index, could also sway sentiment.

From an industrial perspective, China’s policy announcements will be critical. Any signs of infrastructure investment or tariff relief could boost silver demand, particularly in electronics and solar panel production. Conversely, further delays in economic clarity from Beijing could weigh on sentiment.

Forecast: Bulls Have the Edge Over $30.44

Daily Silver (XAG/USD)

Silver’s weekly close above the $30.44 pivot gives the market a bullish tilt heading into next week. A breakout above $31.00 could open the door to targets in the $31.81–$32.33 range. However, if silver fails to hold above $30.44, downside risks increase, with sellers likely targeting $29.86.

Traders should focus on Federal Reserve announcements, Chinese policy developments, and gold’s ongoing rally for directional cues. While silver remains on a bullish footing, the market needs fresh catalysts to sustain momentum.

More Information in our Economic Calendar.

About the Author

James Hyerczykauthor

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.