Silver (XAG) Forecast: Will CPI Report Trigger a Silver Rally or More Declines?

Silver Prices Feel the Squeeze as Dollar Strength and Fed Caution Shape Market Sentiment

Silver faced a turbulent week, closing at $31.31—down $1.14, or 3.52%—marking its third straight weekly decline. After hitting a high of $32.92, prices slid to a low of $30.83 before the Friday close, weighed down by a stronger U.S. dollar, rising Treasury yields, and signals from the Federal Reserve suggesting a cautious approach to further rate cuts.

Gold also fell sharply, posting its largest weekly loss in over five months, which added to the downward pressure on silver. With inflation risks due to President Trump’s re-election and the Fed expected to maintain higher rates, both metals are poised for more challenges, with silver potentially testing support around $30.44 to $30.12 in the near term.

Dollar Strength and Treasury Yields Create Headwinds

The re-election of Donald Trump provided a boost to the dollar, as traders anticipated the potential for fiscal policies such as tax cuts and tariffs that could drive inflation. A stronger dollar, which hit a four-month high, generally reduces the appeal of dollar-denominated assets like silver and gold by making them more expensive for international buyers. Similarly, the U.S. 10-year Treasury yield climbed to 4.47%, which further pressured silver, as rising yields make non-yielding assets like silver less attractive.

Federal Reserve’s Rate Cut and Cautious Guidance

While the Federal Reserve cut rates by 25 basis points, bringing the federal funds rate to 4.5%-4.75%, Fed Chair Jerome Powell’s careful commentary suggested that future rate cuts might be limited. This added uncertainty around the Fed’s next moves, with markets now largely pricing in one more rate cut in December, followed by a likely pause. A sustained high-rate environment would weigh on silver, as higher rates support the dollar and decrease silver’s appeal as a safe-haven asset.

China’s Stimulus and Demand Outlook

China’s new $1.4 trillion stimulus plan, though extensive, faces challenges due to potential trade tensions with the U.S., which could limit its effectiveness in boosting silver demand. The stimulus package, aimed at bolstering local government finances and infrastructure, could support industrial demand for silver if fully implemented. However, any new U.S. tariffs could complicate this outlook, potentially reducing China’s consumption of silver-related commodities.

Physical Demand Slows in Key Markets

Physical silver demand softened across key markets, with Indian buyers pausing purchases after recent festival-driven buying and subdued demand reported in Japan and Singapore. This hesitancy, compounded by market uncertainty, contributed to silver’s weekly decline, and traders remain cautious on near-term demand in the face of price volatility and high global economic uncertainty.

Market Forecast for Next Week

Silver’s outlook remains under pressure heading into next week, with a strong dollar, elevated Treasury yields, and the Federal Reserve’s recent decision to maintain a restrictive rate policy limiting upside potential. After three consecutive weeks of losses, silver may test lower support between $30.44 and $30.12 if bearish momentum continues.

Next week’s U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) reports on November 13 could further shape silver’s trend. If inflation data surpasses expectations, it may lead the Fed to keep rates higher for longer, which would likely strengthen the dollar and weigh on non-yielding assets like silver and gold. This scenario could see silver prices pressured toward lower support levels.

Conversely, if inflation data comes in weaker than forecast, it might open the door to more dovish Fed signals, which could provide some relief to silver. However, with the Fed’s current cautious stance, significant upside remains limited, and silver is expected to trade within a constrained range in the near term.