Silver (XAG) Forecast: Is the Metal Set for More Volatility as Inflation Pressures Mount?

Silver Surges on Safe-Haven Demand, But Fed Policy and Tariffs Could Create Volatility

Silver rallied last week as traders sought refuge from growing economic uncertainty, fueled by geopolitical tensions and renewed tariff threats from the U.S. However, the metal lost momentum on Friday as the dollar strengthened following inflation data that reinforced the Federal Reserve’s cautious stance on rate cuts. With key economic reports ahead, silver’s next move hinges on employment data and potential trade policy shifts.

Last week, XAG/USD settled at $31.32, up $0.73 or +2.37%.

Tariff Uncertainty Drives Safe-Haven Demand

Investor concerns over tariffs played a significant role in silver’s gains last week. President Donald Trump’s renewed trade threats against Canada, Mexico, and potentially China raised fears of economic disruptions and higher inflation, driving demand for precious metals. While silver has not been directly impacted by tariff policies, uncertainty over global trade and economic stability has pushed investors toward safe-haven assets.

Gold’s breakout above $2,800 reinforced silver’s strength, as market participants sought protection against rising geopolitical and economic risks. Precious metals benefited from the prevailing uncertainty, with traders hedging against the potential for further disruptions in global supply chains.

Fed Holds Rates, but Inflation Concerns Linger

The Federal Reserve maintained its policy stance last week, keeping interest rates steady at 4.25%–4.50%. Fed Chair Jerome Powell emphasized that rate cuts remain dependent on continued progress in lowering inflation or signs of economic weakness. However, the latest inflation data showed prices rising slightly faster than expected, keeping pressure on the Fed to remain cautious.

The central bank’s preferred inflation measure, the Gold’s breakout, showed a 2.8% annual increase in core inflation. This reading, while in line with forecasts, remains above the Fed’s 2% target, raising doubts about the likelihood of near-term rate cuts. The higher inflation data strengthened the dollar, weighing on silver’s momentum heading into the weekend.

Dollar Strength Caps Gains

Despite its strong gains earlier in the week, silver struggled to sustain momentum on Friday as the U.S. dollar advanced. The combination of elevated inflation and the Fed’s cautious outlook led traders to reassess expectations for rate cuts, which in turn provided support for the dollar. Rising Treasury yields further reinforced this trend, making it more challenging for silver to extend its rally.

Gold, in contrast, maintained its upward momentum, benefiting from ongoing safe-haven demand. Silver’s hesitation in the face of dollar strength suggests that its next move may depend on whether macroeconomic conditions continue to support precious metals as a hedge against uncertainty.

Market Outlook: Focus on Jobs Data and Trade Developments

This week, traders will be closely watching the U.S. Non-Farm Payrolls (NFP) report, which could have significant implications for Federal Reserve policy. A weaker-than-expected jobs report may raise expectations for earlier rate cuts, which could support silver. Conversely, a strong labor market reading may reinforce the Fed’s patient approach, keeping the dollar firm and pressuring silver’s appeal.

Trade policy developments will also remain a key factor. If new tariffs or further trade tensions emerge, market uncertainty could increase, providing support for silver as a safe-haven asset. However, if inflation concerns persist and the Fed maintains a hawkish stance, silver may struggle to find additional buying interest.

With conflicting forces at play, silver’s short-term direction remains uncertain. Traders should prepare for potential volatility as economic data and policy decisions shape market sentiment in the days ahead.

Technically, XAG/USD continued to build on its potentially bullish chart pattern. Silver crossed to the strong side of a key pivot at $30.44, making it new support. Meanwhile, the strong close at $31.32 put the market in a position to challenge the next pivot level at $31.81, followed by a short-term top at $32.33. The pivot level proved to be a headwind late last week, stopping the rally at $31.74. This contributed to Friday’s sell-off.

Essentially, we’re looking for continued strength over $31.81 and renewed weakness under $30.44. Trading between these levels will deliver a neutral tone.

More Information in our Economic Calendar.