Silver (XAG) Forecast: Is This Pullback Overdone or Just Getting Started?

Silver Retreats as Fed Caution, Dollar Strength, and China Demand Weigh

Silver ended the week under pressure, retreating from recent highs as multiple macro headwinds converged to stall the recent rally. While the metal benefited early in the week from gold’s explosive move and safe-haven demand, sentiment turned cautious following the Federal Reserve’s latest policy signals, a firmer U.S. dollar, and persistent concerns over Chinese industrial demand.

Last week, XAG/USD settled at $33.03, down $0.77 or -2.29%.

Fed Message Clouds Rate Cut Expectations

The Federal Reserve left rates unchanged at 4.25%–4.50%, as expected, but its updated projections injected new uncertainty into the interest rate outlook. Chair Jerome Powell reiterated the central bank’s expectation for two cuts this year, yet he emphasized a need for “greater confidence” in inflation progress before acting. The Fed also raised its inflation forecast for next year to 2.7%, while cutting growth estimates.

This muddled guidance—combined with stronger-than-expected inflation expectations from recent surveys—pushed back against market pricing for aggressive easing, which had assumed three rate cuts. The shift triggered a risk-off reaction across metals, particularly in silver, which is highly sensitive to rate expectations and dollar movements.

Dollar Strength, Gold Pullback Hit Silver

Silver came under additional pressure as the U.S. dollar index climbed 0.2% into the week’s close, tightening conditions for non-yielding assets.

Gold, which had posted a record high of $3,057, also pulled back sharply, sparking broad selling in the precious metals space. While gold retained a modest weekly gain on safe-haven interest, silver—more reliant on industrial and investor flows—underperformed as sentiment cooled.

China Demand Signals Remain Weak

Demand uncertainty from China continues to limit silver’s upside potential. As the largest consumer of industrial silver, weak offtake or lackluster policy stimulus weighs heavily on short-term expectations. With no clear signs of an economic rebound or supportive trade announcements, traders are viewing China as a net risk for silver exposure. Combined with broader geopolitical tension and unresolved U.S. tariff policy, physical demand concerns are a growing constraint.

Market Forecast: Caution Prevails as Macro Risks Build

Silver enters the new week on the defensive, trading near key support levels around $32.53–$31.81. While the broader trend remains intact, near-term conditions suggest downside risk if the Fed remains cautious and the dollar extends its gains.

Conversely, any dovish pivot or signs of stronger Chinese demand could stabilize prices. Until then, silver is vulnerable to further macro-driven selling, with traders closely monitoring Fed commentary, inflation data, and physical demand cues.

More Information in our Economic Calendar.