Silver (XAG) Forecast: Price Stalls Below 200-Day MA – Is a Drop to $28.40 the Next Move?

Macro Pressures Limit Silver’s Upside Despite Supply Deficits

Silver prices closed the week lower and extended losses into Monday, as traders failed to break through the 200-day moving average at $29.76. The rejection at this key technical level reflects ongoing macroeconomic pressures, with Federal Reserve policy and a strong U.S. dollar capping upside potential. Despite persistent supply deficits, silver continues to face headwinds from higher yields and dollar strength.

At 13:37 GMT, XAG/USD is trading $29.21, down $0.17 or -0.60%.

Supply Deficits Deepen

Fundamental data for 2024 highlights a widening gap between silver supply and demand. Production rose by just 2% to 1.03 billion ounces, while demand climbed 7% to 1.21 billion ounces, leaving the market with a 182-million-ounce deficit. This marks the fourth consecutive year of undersupply, largely driven by industrial demand from green technologies. Solar panel and electric vehicle production remain key growth sectors, with projections suggesting solar manufacturing could consume most of the world’s silver output by 2050.

China’s $411 billion infrastructure stimulus plan for 2025 is expected to further boost industrial silver demand, aligning with the country’s renewable energy initiatives. However, silver’s price action has been muted, signaling that broader macroeconomic forces are currently dominating market sentiment.

Federal Reserve and Dollar Strength Weigh Heavily

Silver’s upside remains limited by Federal Reserve policy and dollar strength. After implementing three rate cuts in late 2024, the Fed now projects only 50 basis points of easing in 2025. This measured approach supports the dollar and keeps Treasury yields elevated, diminishing the appeal of non-yielding assets like silver. The 10-year Treasury yield’s climb to 4.641% adds to silver’s opportunity cost, further pressuring prices.

Geopolitical Uncertainty Provides Modest Support

Despite headwinds, geopolitical tensions offer some support for silver as a secondary safe-haven asset. Continued unrest in Ukraine and the Middle East has driven gold demand, indirectly benefiting silver. Additionally, ongoing central bank gold purchases contribute to stability in precious metals markets, preventing deeper price declines for silver.

Outlook

Silver’s rejection at the 200-day moving average signals near-term weakness, with prices likely to remain under pressure as the Fed’s restrictive stance and dollar strength persist. Unless economic data or policy shifts materially, silver may consolidate below $29.76. The next target is the main bottom at $28.74, but the value area that could attract new buyers is $28.40 to $26.87.

Longer-term, the outlook remains bullish, supported by structural supply deficits, increasing green technology demand, and Chinese stimulus efforts. Investors focused on long-term holdings can find value in silver’s industrial growth story, while short-term traders should be prepared for further downside or consolidation until macroeconomic conditions become more favorable.