Silver (XAG) Forecast: Tumbling Prices as Fed’s Uncertainty Stirs Bearish Momentum

Silver Slides on Fed Policy Uncertainty and Dollar Strength

Silver prices fell for a second straight session on Friday, breaking below key technical levels at $31.29 and $30.98. The metal’s downside momentum is increasing, putting the focus on support near the last main bottom at $29.64 and the 200-day moving average at $29.51. Resistance at $31.67, tied to the 50-day moving average, remains a critical threshold for any reversal of the intermediate bearish trend.

At 13:24 GMT, XAG/USD is trading $30.75, down $0.22 or -0.72%.

Fed Policy Drives Market Sentiment

Investor sentiment toward silver remains cautious as the Federal Reserve’s policy path for 2025 becomes a key focus. While a 25 basis point rate cut is expected at the Fed’s December 17-18 meeting, Chair Jerome Powell’s commentary will be pivotal in shaping market expectations. Currently, CME FedWatch Tool data indicates a 97% probability of a December cut, but the pace of rate reductions in 2025 remains uncertain.

Macroeconomic data has bolstered the case for a cautious Fed. Wholesale prices rose 0.4% in November, and core inflation remains elevated at 3.3% annually, well above the central bank’s 2% target. Though jobless claims data showed some signs of labor market softening, resilient economic growth and persistent inflationary pressures suggest the Fed may adopt a measured approach to future easing.

Dollar and Treasury Yields Exert Pressure

A stronger U.S. dollar and rising Treasury yields are compounding challenges for silver. The dollar index gained 0.1% on Friday, climbing to 107.11 and marking its best weekly performance in a month. Meanwhile, the 10-year Treasury yield edged higher to 4.344%, increasing the appeal of interest-bearing assets at the expense of non-yielding silver.

Short-Term Market Outlook

Silver remains vulnerable to further declines, with bearish technical indicators aligning with macroeconomic headwinds. A test of support at $29.64 and $29.51 appears likely if the current downtrend persists. Resistance at $31.67 will be a key level for traders seeking signs of stabilization. With Fed policy and U.S. economic data driving market moves, silver is likely to stay under pressure in the near term.

More Information in our Economic Calendar.