Silver (XAG) Forecast: Safe-Haven Demand Fuels Gains, But Will Inflation Cap the Rally?

Silver Gains as Safe-Haven Demand Offsets Market Uncertainty

Silver ended last week with a strong 4.42% gain, supported by safe-haven demand and growing expectations of Federal Reserve rate cuts. While gold also saw volatility, silver managed to hold onto its weekly gains despite rising Treasury yields, which typically limit upside for non-yielding assets.

The U.S. nonfarm payrolls report showed 151,000 jobs added, falling short of expectations. The unemployment rate edged up to 4.1%, reinforcing speculation that the Fed will begin cutting interest rates later this year. However, rising Treasury yields, with the 10-year yield hitting 4.303%, signaled investor caution and kept silver’s rally in check.

Dollar Weakness, Global Trade Concerns Support Silver

The U.S. dollar index dropped 3.40% to a four-month low, making silver more attractive to international buyers. Meanwhile, China’s central bank continued its gold purchases for a fourth straight month, indirectly supporting silver, which often follows gold’s lead in the monetary metals space.

Trade policy remains a wildcard. President Trump’s shifting stance on tariffs for Mexico, Canada, and China is keeping markets uneasy, with potential economic disruptions affecting silver’s industrial demand outlook. Additionally, Germany’s unexpected fiscal stimulus plans rattled European bond markets, adding to global economic uncertainty.

CPI Report to Drive Silver’s Next Move

The key market event this week is Wednesday’s U.S. Consumer Price Index (CPI) report, expected to show a 0.3% increase in February after January’s 0.5% gain—the biggest monthly rise since August 2023.

If inflation remains elevated, it could force the Fed to delay rate cuts, potentially limiting silver’s upside. On the other hand, a softer CPI print would strengthen expectations of monetary easing, creating a more favorable backdrop for silver. Markets currently expect 70 basis points of Fed rate cuts this year, but those expectations could shift depending on the inflation data.

Market Outlook: Fed Policy and Inflation Take Center Stage

Silver’s near-term direction will largely depend on inflation trends, interest rate expectations, and global economic conditions. If inflation remains stubbornly high, the Fed may be forced to keep rates steady longer than markets anticipate, which could weigh on silver. However, further signs of economic slowing—especially in jobs data—could boost expectations for rate cuts, supporting silver’s appeal as a hedge against monetary easing.

Technically, XAG/USD is in an uptrend and will remain this way as long as it stays on the bullish side of the 52-week moving average at $29.90. On the upside, crossing to the strong side of the Fib level at $32.53, will put the market in a position to challege the recent top at $33.39. Overcoming this level could trigger an acceleration to the upside with $34.87 to $35.40 the main target.

With ongoing uncertainty around trade policy, inflation, and Federal Reserve decisions, silver traders should remain focused on macroeconomic developments rather than short-term price moves.

More Information in our Economic Calendar.