Silver (XAG) Forecast: Fed Decision Looms as $38.51 Becomes Key Market Battleground

Dollar Strength, Fed Uncertainty Cast Shadow on Silver

Silver (XAG/USD) edged lower on Tuesday, extending its pullback from last week’s multi-month high at $39.53. Prices fell to $38.05 during the European session, slipping below the $38.51 support level and testing near-term demand. The move mirrors broader uncertainty across metals, as traders await fresh signals from the Federal Reserve’s two-day policy meeting.

Silver’s tight correlation with gold remains in focus. Gold prices stabilized above $3310.48, but remained under pressure below the 50-day moving average at $3343.30. Unless bullion can reclaim the $3347.97 pivot, selling momentum in both metals could build. Strength in the U.S. dollar has added to this pressure, tempering safe-haven flows and capping silver’s rally for now.

At 13:08 GMT, XAG/USD is trading $38.06, down $0.10 or -0.27%.

Gold Tariff Risks Reinforce Silver’s Demand Concerns

While the U.S.-EU trade truce temporarily eased tensions, lingering tariffs continue to threaten global industrial demand—a critical component for silver’s consumption profile.

Most EU exports to the U.S. still face a 15% tariff, keeping inflationary concerns and trade uncertainty alive. The U.K.-U.S. agreement locking in a 10% tariff also suggests elevated costs may remain embedded in the system.

With China-U.S. talks still unresolved, silver may struggle to find fundamental support from the industrial side of its dual-use nature.

Technicals Suggest a Pause After Breakneck Rally

Silver’s recent run from the May 15 low at $31.65 to $39.53 saw price accelerate well above its 50-day moving average, currently at $36.30. After forming back-to-back highs at $39.13 and $39.53, bulls lost momentum near psychological resistance. Support at $37.50, followed by $36.16, now marks key downside levels, with $38.51 having already given way.

A close back above $38.51 would help reestablish bullish momentum, but failure to hold current levels opens the door for further pullback. The 200-day SMA at $32.93 remains a longer-term floor.

Can the Federal Reserve Shift the Tone?

The Fed decision due Wednesday will be pivotal for silver and gold. While no rate cut is expected, any hint of a dovish shift could weaken the dollar and lend support to precious metals. Conversely, a hawkish tone or upward revision in rate expectations would likely weigh further on bullion and silver alike.

Market Forecast: Cautious with Downside Bias Below $38.51

Silver remains vulnerable below $38.51, with downside risks building toward $37.50 and $36.16. Broader direction will depend heavily on Fed commentary and dollar strength.

Without a decisive close back above $38.51, the metal may remain under pressure in the short term. Traders should monitor gold’s struggle below $3347.97 for cues, as any renewed weakness in bullion could accelerate silver’s retreat.

More Information in our Economic Calendar.