Silver (XAG) Forecast: Persistent Rate Pressures Keep Rallies in Check

Silver Prices Slide Below $30, Facing Persistent Headwinds

Silver prices have fallen sharply, slipping below the crucial $30 mark to trade at $28.75 on Thursday, a substantial decline from December’s high of $32.33. This drop signals a technical breakdown, as prices now sit below both the 50-day moving average of $31.54 and the 200-day moving average of $29.64, a key long-term support level. The decline reflects a combination of softer inflation data and a hawkish Federal Reserve outlook, which could continue to challenge silver’s market performance.

Slowing Inflation Fails to Bolster Silver Prices

The latest Personal Consumption Expenditures (PCE) price index showed inflation easing to 2.4% in November, slightly below the anticipated 2.5%. Falling energy prices and subdued goods inflation contributed to the cooling trend. However, this did little to support silver, as the metal struggles to maintain its role as a safe haven. Prices have retreated steadily from November’s high of $34.87, as the market digests signs of moderating inflation.

Federal Reserve Policy Adds Pressure to Silver

The Federal Reserve’s 2025 outlook projects only two 25-basis point rate cuts, signaling a conservative stance that has weighed on silver prices. Despite resilient economic data and declining jobless claims, higher-for-longer rates continue to pressure the metal. This policy backdrop aligns with silver’s drop from recent highs and its struggle to hold key technical levels.

Consumer Spending and Industrial Demand Provide Mixed Signals

Consumer spending rose 0.4% in November, led by a 0.7% increase in goods purchases, including motor vehicles and recreational products. While this reflects robust current economic activity, a declining personal savings rate of 4.4% raises concerns about future constraints. Industrial silver demand, tied closely to consumer trends, remains vulnerable to these economic shifts.

Near-Term Outlook: Silver Faces Persistent Resistance

The short-term outlook for silver appears bearish. Prices remain below the crucial 200-day moving average at $29.64, with further downside risk if this level is not reclaimed. Subdued inflation data, persistent rate pressures, and technical breakdowns are creating significant headwinds. While industrial demand may offer some support, resistance at $30 and the 50-day moving average of $31.54 limit recovery potential unless monetary policy signals turn decisively dovish.

More Information in our Economic Calendar.