Silver (XAG) Forecast: Powell Testimony, CPI, and PPI—Silver Outlook Hangs in Balance

Silver Market Recap: Is Another Breakout Ahead?

Silver extended its rally last week, reaching a multi-month high of $32.65 before easing slightly. The metal remains well-supported by industrial demand and safe-haven flows, but the Federal Reserve’s cautious stance on rate cuts, stronger-than-expected wage growth, and rising Treasury yields have slowed its momentum.

Traders are now turning their attention to this week’s inflation data and Fed Chair Jerome Powell’s testimony before Congress, both of which could determine whether silver regains upside traction or faces near-term pressure.

Last week, XAG/USD settled at $31.81, up $0.48 or +1.55%.

Did the Jobs Report Change the Fed’s Timeline?

The January Non-Farm Payrolls (NFP) report showed that the U.S. economy added 143,000 jobs, falling short of the 169,000 forecast. However, wage growth surged by 0.5% for the month—well above expectations—bringing annual wage gains to 4.1%. The January Non-Farm Payrolls (NFP) report dipped to 4.0%, adding to concerns that tight labor conditions could keep inflation elevated.

While job growth slowed, the strong wage data reinforces the view that inflationary pressures persist. This complicates the Fed’s decision-making, as slower employment growth would typically justify rate cuts, but higher wages suggest inflation risks remain.

How Are Treasury Yields and Inflation Expectations Impacting Silver?

Treasury yields climbed after the jobs report, with the 10-year yield rising to 4.489% and the 2-year yield reaching 4.289%. The move reflects expectations that higher wages could fuel inflation, making it more difficult for the Fed to justify early rate cuts.

Meanwhile, consumer inflation expectations have worsened. The University of Michigan’s latest survey showed that respondents now expect inflation to reach 4.3% over the next year, a full percentage point jump from January. While higher inflation expectations typically support silver, rising yields and a firm dollar have limited immediate upside.

What Will CPI and PPI Data Tell Us?

With rate expectations in focus, upcoming inflation data will play a key role in shaping silver’s direction. Markets expect:

• Consumer Price Index (CPI) to rise 0.2% month-over-month, holding the annual inflation rate at 3.1%.
• Core CPI to increase 0.3%, keeping annual core inflation at 3.5%.
• Producer Price Index (PPI) to rise 0.3%, signaling continued cost pressures for businesses.

A hotter-than-expected inflation print could reinforce the Fed’s cautious stance, pushing yields and the dollar higher while pressuring silver. On the other hand, a weaker reading could increase rate cut bets, making silver more attractive.

Where Do Fed Rate Cut Odds Stand?

Markets are currently pricing in a 70% probability of a first Fed rate cut in June, with little chance of a move in March. Powell’s testimony before Congress on Wednesday and Thursday will be critical. If he signals concerns about slowing growth or tighter credit conditions, markets could shift expectations toward an earlier rate cut, which would likely support silver. However, if Powell maintains a cautious tone, silver could face continued pressure from firm Treasury yields and a strong dollar.

Will Industrial Demand and Trade Policy Support Silver?

Silver’s long-term support comes from its industrial applications, particularly in solar energy, electronics, and medical technology. With solar panel production accounting for 10% of global silver demand, expansion in renewable energy remains a bullish factor.

Geopolitical risks could also play a role. The U.S.-China trade conflict remains unresolved, with China retaliating against new U.S. tariffs by imposing a 15% duty on liquefied natural gas and other American exports. While silver is not directly affected, rising trade tensions could drive safe-haven demand if global economic uncertainty increases.

Market Forecast: Fundamentals Remain Supportive, but Fed Policy Is Key

Silver’s near-term direction will depend on inflation data, Powell’s testimony, and shifting rate expectations. If CPI and PPI show inflation is cooling, silver could regain momentum as rate cut bets strengthen. If inflation remains stubborn or Powell reinforces a cautious stance, silver may face further headwinds from rising yields and a stronger dollar.

Longer term, industrial demand and safe-haven flows remain key drivers. However, until there is a clearer signal on monetary policy, silver may consolidate as the market waits for its next major catalyst.

Technically, the trend edged to up last week when buyers pierced the $32.33 level. However, it only reached $32.65 before it sold off into the weekly close at $31.81.

Heading into the new week, resistance is the Fibonacci retracement zone at $31.81 to $32.53 and last week’s high at $32.65. The latter is a potential trigger point for an acceleration to the upside with $34.87 the next major target.

Meanwhile, a sustained move under the pivot at $31.81 will indicate the lack of buyers or renewed selling. This could lead to a retest of another pivot at $30.44.

More Information in our Economic Calendar.