Silver (XAG) Forecast: Dollar Strength and Fed Caution Weigh on Outlook

Silver Drops as Dollar Strength, Gold Retreat and Fading Safe-Haven Demand Drive Weekly Losses

Silver (XAG/USD) fell 1.32% last week to settle at $32.30, logging its second straight weekly decline as traders exited defensive positions. The metal continued to trade lower in tandem with gold, which has seen steady selling following its record-setting rally in April. While the gold/silver ratio has started to realign, silver remains under pressure as both macroeconomic drivers and market sentiment have turned less favorable for precious metals.

Dollar Rally and Risk-On Mood Erode Metal Demand

A stronger U.S. dollar was the dominant force behind silver’s decline. With the dollar extending its rally for a fourth week, investor appetite for dollar-denominated assets like silver has faded, especially as global risk sentiment improves. The temporary tariff truce between the U.S. and China helped boost equities and reduce geopolitical risk, reducing the incentive to hold safe-haven assets like silver and gold.

Fed’s Stance Tempers Impact of Soft Inflation Data

While inflation readings came in softer than expected—highlighted by a 0.5% drop in the producer price index and weaker retail sales—Federal Reserve Chair Jerome Powell signaled no urgency to cut rates. Powell’s remarks pointed to long-term structural challenges that may keep real rates elevated, muting any bullish reaction in precious metals. Even with markets still pricing in about 50 basis points of cuts later this year, the Fed’s cautious messaging has dampened expectations for rapid easing.

Gold/Silver Spread Narrows, But Sentiment Still Fragile

Part of silver’s relative stability came from a correction in the gold/silver ratio, which had stretched aggressively during gold’s April surge. As gold prices reversed, silver held up better, suggesting some unwinding of spread trades. However, that technical adjustment hasn’t been enough to inspire fresh bullish flows. Silver continues to follow gold lower, reflecting a broader retreat from metals in the face of stronger equities and a firm dollar.

Outlook: Cautious Tone Holds Unless Data Surprises

Silver enters the week with a bearish bias, undercut by fading safe-haven demand and a lack of conviction around Fed rate cuts. Unless upcoming data—including fresh inflation reads or Fed commentary—shifts the policy outlook or dents dollar strength, silver is likely to remain on the defensive. For now, sellers remain in control.

Technically, the market is trapped inside the $34.59 to $28.31 range. Therefore, the pivot formed by this area is likely to set the tone next week. It comes in at $31.45.

A sustained move over $31.45 will indicate the presence of buyers. If this shifts the momentum to the upside, buyers may take a run at $34.59 to $34.87 over the near-term.

If sellers overtake $31.45 then look for a pullback with the 52-week moving average at $30.92, the next likely target.

More Information in our Economic Calendar.