Silver (XAG) Forecast: Waller Opens the Door to Easing – A Catalyst for Silver Prices?

Will Fed Rate Cuts and Inflation Trends Boost Silver Prices?

The silver market faces a pivotal moment as traders evaluate the effects of potential U.S. Federal Reserve rate cuts, cooling inflation, and global economic signals. With China’s industrial recovery showing signs of stabilization, silver’s outlook is shaped by competing bullish and bearish factors.

At 12:14 GMT, XAG/USD is trading $30.61, down $0.20 or -0.66%.

What Factors Support a Bullish Outlook for Silver?

The Federal Reserve’s dovish stance is a significant bullish driver. Fed Governor Christopher Waller’s indication of three to four rate cuts in 2025 could lower the opportunity cost of holding non-yielding assets like silver. Historically, precious metals perform well during periods of monetary easing as investors shift to inflation hedges.

Recent inflation data supports this case. The CPI rose just 0.2% monthly, and annual inflation eased to 3.2%, allowing the Fed more flexibility to adopt accommodative policies. Falling Treasury yields—down 13 basis points on the 10-year and 10 basis points on the 2-year—reduce the appeal of fixed-income investments, potentially driving capital toward precious metals.

A weaker U.S. dollar, often a byproduct of rate cuts, would also boost silver by making it cheaper for international buyers. Furthermore, China’s 5% GDP growth, alongside improving industrial and retail sales, signals rising demand for industrial silver, especially as the country stabilizes its property market.

What Are the Key Risks for Silver Prices?

Despite these tailwinds, several risks could cap silver’s upside. Strong U.S. retail spending and rising business confidence, as highlighted by the Philadelphia Fed survey, indicate economic resilience. This strength may lessen the urgency for aggressive rate cuts, limiting silver’s appeal.

The dollar’s strength, supported by incoming Treasury Secretary Scott Bessent’s commitment to maintaining its global dominance, could also weigh on silver. A stronger dollar makes silver more expensive for international buyers, curbing demand.

Additionally, China’s demographic issues, including a third year of population decline, could dampen long-term industrial silver demand. If markets have misjudged the Fed’s willingness to cut rates, silver could face renewed selling pressure.

Will Technical Momentum Hold?

Technically, silver’s three-week rally reflects bullish sentiment, but its momentum is fragile. Current prices remain above critical support levels, including the 50% retracement at $30.53 and the 50-day moving average at $30.44. A drop below these levels could drive prices toward the 200-day moving average at $30.00, a crucial support area.

On the upside, a break above $30.98, Thursday’s high, could trigger momentum targeting resistance between $31.81 and $32.33. However, without strong catalysts, profit-taking near resistance could stall the rally.

Market Forecast

Silver’s outlook hinges on the interplay of monetary policy, economic resilience, and industrial demand. Short-term strength is possible if the Fed signals rate cuts and China sustains its recovery. However, risks from a stronger dollar and economic resilience in the U.S. could limit gains. Key technical levels, particularly the $30.00 support zone, will be critical in determining whether silver maintains its bullish momentum or faces a pullback. Expect heightened volatility as traders react to macroeconomic data and Fed policy developments.

More Information in our Economic Calendar.