Silver (XAG) Forecast: Will a Sustained Move Below $30.44 Signal Deeper Losses Ahead?

Silver Ends Lower as Macro Pressures Outweigh Supply Deficits

Silver (XAG/USD) closed the week lower, falling in limited holiday price action after traders failed to push prices above critical resistance levels. Despite persistent supply deficits and robust industrial demand, silver faces mounting headwinds from Federal Reserve policy and dollar strength​.

Last week, Silver (XAG/USD) settled at $29.38, down $0.13 or -0.43%.

Supply Shortages Persist, but Market Reacts Weakly

Silver’s fundamental outlook remains defined by a widening supply-demand imbalance. In 2024, production rose by just 2% to 1.03 billion ounces, while demand surged by 7% to 1.21 billion ounces, leaving the market with a 182-million-ounce deficit​​. This marks the fourth consecutive year of undersupply, driven by rising demand from green technologies like solar panels and electric vehicles.

China’s $411 billion infrastructure stimulus for 2025 further bolsters silver’s industrial prospects​. Solar panel manufacturing alone could eventually consume most of the world’s silver output by 2050, reinforcing long-term bullish potential​. Yet, silver’s muted reaction to these supply pressures indicates that broader macroeconomic forces are currently in control.

Fed Policy and Dollar Strength – The Dominant Narrative

The Federal Reserve’s tightening stance looms large over the silver market. After cutting rates three times in late 2024, the Fed now projects only 50 basis points of easing in 2025​​. This limited rate-cut path supports a stronger dollar and higher Treasury yields, creating stiff competition for non-yielding assets like silver.

The dollar’s strength, coupled with the 10-year Treasury yield climbing to 4.641%, continues to dampen investor appetite for precious metals​. Rising yields increase the opportunity cost of holding silver, further overshadowing its supply-side bullish story.

Geopolitical Uncertainty Offers Some Support

While macro pressures weigh on silver, geopolitical risks and central bank buying of gold offer some cushion. Escalating tensions in Ukraine and the Middle East have driven gold demand, indirectly supporting silver as a secondary safe-haven asset​.

Bullish or Bearish?

Bearish (Short-Term) – Macro factors are currently overpowering supply shortages. The Fed’s restrictive stance and dollar strength suggest limited upside for silver in the immediate future. Until rate cut expectations shift meaningfully or economic data signals weakness, silver is likely to remain under pressure.

Bullish (Long-Term) – Structural supply deficits, green technology demand, and geopolitical uncertainties paint a bullish long-term picture. However, without a catalyst to break the Fed’s grip on market sentiment, silver’s upside may be delayed until late 2025 or beyond.

Conclusion

Silver’s fundamentals remain solid, but the weight of higher rates and dollar strength skews the short-term outlook to the bearish side. Long-term investors can take comfort in supply deficits, but traders should brace for continued consolidation or modest downside until macro conditions turn more favorable.

Technically, the key resistance and pivot level is $30.44. A sustained move under this level will be a sign of weakness with $28.75 the next target. This is a potential trigger point for an acceleration into $26.47 to $26.02. Overcoming $30.44 will signal the return of buyers with $32.26 – $32.33 a potential upside target zone.