Silver (XAG) Forecast: Price Pressure Builds as Fed Caution, Yields, and Dollar Firm Up

Silver Prices Weaken as Technical Support Levels Come into Focus

Silver prices slipped on Monday, continuing a decline that has pushed the metal below its 50-day moving average of $31.45 for the fourth consecutive session. This recent technical weakness could lead to a steeper drop toward a critical pivot at $30.67, with some analysts expecting a short-lived bounce on the first test of this level. However, if this support breaks, silver may fall further, potentially targeting the 200-day moving average at $28.56—a key level that could attract more bearish momentum if breached.

Conversely, if silver can regain strength above the 50-day moving average, it could trigger a quick round of short-covering, pushing prices toward a minor resistance point at $32.49. This level could serve as a preliminary target for traders, with bullish momentum depending largely on broader economic cues, including interest rates and dollar movements.

At 12:52 GMT, XAG/USD is trading $31.24, down $0.07 or -0.23%.

Surging Treasury Yields Challenge Precious Metals

Treasury yields surged following Donald Trump’s re-election last week, raising inflation concerns that could limit the Federal Reserve’s room to maneuver on rates. The 10-year yield closed at 4.306% after peaking above 4.4%, and the 2-year note settled at 4.25%. These moves in the bond market have implications for precious metals like silver and gold, as higher yields often dampen demand for non-yielding assets. Despite a 25-basis-point rate cut last week that lowered the Federal Funds rate to a range of 4.50%-4.75%, traders are recalibrating expectations, with the Fed potentially eyeing a 2024 terminal rate closer to 3.5% rather than the previously anticipated 3.0%.

Dollar Holds Firm Ahead of Inflation Data and Fed Remarks

The dollar’s steady performance on Monday reflects heightened market anticipation for Wednesday’s October inflation data. Economists expect CPI to rise 0.2% month-over-month and 2.5% annually, with core inflation holding at 3.3%. The Producer Price Index is forecasted to show a 0.3% monthly increase and a 2.3% annual gain. Strong inflation data could bolster the dollar, diminishing the odds of a December rate cut and placing added pressure on precious metals. Additional insights are expected as several Federal Reserve officials, including Chair Jerome Powell, are scheduled to speak this week, potentially signaling future policy moves.

Weak Chinese Demand Poses Downside Risks for Precious Metals

China’s latest economic data showed slowing consumer prices and continued deflationary pressures in producer prices, underscoring weak demand. Although Beijing has enacted various stimulus measures, their impact on boosting commodity demand remains limited. With upcoming reports on China’s retail sales and industrial production, markets will be watching closely for any signs of recovery in demand, which would influence silver and gold prices significantly. A slowdown in Chinese demand could weigh on both metals, especially as they often move in tandem.

Market Forecast: Bearish Outlook for Silver if Key Support Breaks

Silver’s bearish tone is likely to persist if the metal cannot hold the $30.67 support. Failure at this level could push prices lower toward $28.56, where further declines may be triggered. However, a strong rebound over the 50-day moving average could see silver rally toward $32.49. Short-term sentiment remains bearish, with traders watching inflation data and Fed guidance closely, as these factors will heavily influence silver’s immediate trading path.