Silver (XAG) Forecast: Bullish Setup Holds as Fed Dovishness Targets Breakout Above $36.39

Can Tight Supply and Industrial Strength Keep Silver Above $34.87?

Silver climbed 0.79% to $36.28 at the mid-session on Monday, continuing a bullish trend that has seen the metal gain 8.6% in the past month and nearly 23% year-on-year.

The market is grappling with a mix of supportive fundamentals—deepening supply constraints, record industrial usage, and dovish signals from the Federal Reserve—that are propping up silver despite short-term resistance around the $35–$37 band.

Supply Deficits Enter Fifth Year as Mine Output Falls

The structural imbalance between silver supply and demand remains the core driver of its rally. According to The Silver Institute, the global silver market is on track to register its fifth consecutive annual deficit in 2025. Mine production is expected at 835 million ounces, a notable drop of 7.23% from 2016 levels.

While secondary supply from recycling is projected to rise 24% to 195 million ounces, the increase won’t be enough to close the gap. With demand projected to hold near 1.2 billion ounces, the supply shortfall is expected to persist—supporting prices at current elevated levels.

Industrial Demand Surges Despite Headwinds in Renewables

Industrial fabrication is forecast to surpass 700 million ounces in 2025 for the first time, up 3% from last year. Global solar installations remain a key driver, with growth in photovoltaics expected to hit a new high. While U.S. renewable energy projects face political headwinds, international demand continues to expand.

Additionally, ongoing electrification in autos and infrastructure tied to AI and high-performance computing is further embedding silver in the industrial economy, bolstering its role beyond traditional investment demand.

Fed’s Dovish Tone Adds Fuel to the Rally

Recent commentary from Federal Reserve officials suggests the central bank is preparing for additional rate cuts. Lower interest rates reduce the opportunity cost of holding silver, making the metal more attractive as a non-yielding asset.

The softer dollar and persistent inflation concerns are reinforcing silver’s dual appeal as both an industrial metal and a monetary hedge.

Technical Levels Show Consolidation, Not Reversal

From a technical standpoint, silver remains in a consolidation phase, trading inside Friday’s range with support forming near $35.40 and $34.97. Traders are eyeing $36.39 as a key pivot; a breakout above this level could reignite momentum toward $37.32 and beyond. The current setup favors continuation, not reversal, assuming the metal holds above the recent breakout zone.

Outlook: Bullish Setup Holds Despite Near-Term Consolidation

With mine production declining, industrial demand hitting records, and monetary policy tilting dovish, silver is being backed by real fundamentals—not just sentiment. Short-term resistance may cap upside for now, but the broader setup remains strong.

Traders should watch for a decisive move above $36.39 to signal renewed momentum. If support holds and fundamentals remain intact, silver appears well-positioned to test $40 in the coming months.

More Information in our Economic Calendar.