Silver (XAG) Forecast: Strong Dollar and Yields Push Silver Prices Below $30.50

Silver Under Pressure as Strong Dollar and Economic Data Weigh on Prices

Silver prices traded lower on Tuesday, falling to $30.15 as a stronger U.S. dollar and rising Treasury yields continued to undermine investor sentiment. The market remains cautious ahead of the Federal Reserve’s policy decision, with traders watching for hints on future rate adjustments.

At 15:36 GMT, XAG/USD is trading $30.36, down $0.16 or -0.55%.

Strong U.S. Dollar Limits Silver Upside

The U.S. Dollar Index (DXY) held firm at 106.88, buoyed by resilient economic data and elevated Treasury yields​. Rising U.S. retail sales, which increased 0.7% in November, exceeded expectations, highlighting consumer spending strength​. This reinforced the dollar’s appeal, making silver, which is priced in dollars, more expensive for non-dollar holders.

Treasury yields further pressured silver, with the benchmark 10-year yield climbing to 4.40%. Higher yields increase the opportunity cost of holding non-yielding assets like silver, reducing investor demand​.

Fed Policy Meeting Holds Key to Short-Term Direction

Investor focus now shifts to the Federal Reserve’s upcoming policy statement and its economic projections. While the Fed is widely expected to hold rates steady, its tone regarding future easing will be critical. Markets are currently pricing a 97% chance of a 25-basis-point rate cut next year, but the likelihood of an earlier move remains low​​.

A hawkish stance from Fed Chair Jerome Powell, combined with solid economic performance, could maintain pressure on silver. Conversely, any dovish signals might ease dollar strength, offering some support to precious metals.

Technical Levels to Watch

From a technical perspective, silver is testing key support near $30.34. Further downside could push prices toward the next support at $29.57, which aligns with the 200-day moving average. On the upside, resistance remains at $31.29, followed by $32.26​. The 50-day moving average near $31.64 also poses a significant challenge for bulls.

Short-Term Outlook

In the near term, silver faces bearish risks as the dollar remains strong and Treasury yields stay elevated. A hawkish tone from the Fed could drive silver prices below $30, with $29.57 as the next target. However, should the Fed signal concerns over economic growth or inflation softens, silver may rebound toward resistance at $31.29. Traders will closely monitor Powell’s remarks and upcoming inflation data for further direction.

More Information in our Economic Calendar.