Silver (XAG) Forecast: Fed Jitters Rattle Silver Market as Key Support Levels Tested

Silver Slides as Fed Decision Looms Large

Spot silver (XAG/USD) dropped sharply on Wednesday, unwinding recent gains as traders locked in profits ahead of the Federal Reserve’s rate decision. The sell-off confirmed a bearish reversal from Tuesday’s high at $42.97, signaling a potential short-term top. Prices are currently straddling key support near $41.68 after briefly dipping to $41.14, a level that triggered a quick flush of weak longs.

At 12:47 GMT, XAG/USD is trading $41.79, down $0.76 or -1.79%.

Technical Breakdown: Watch These Key Levels Closely

Silver’s current consolidation is technical in nature, but momentum has shifted to the downside. A sustained move below $41.68 could trigger deeper selling toward a key double-bottom zone at $40.73–$40.40. If that fails, traders will look to the 50% retracement band between $39.96 and $39.59. The 50-day moving average at $39.01 remains the key trend indicator and major support level to watch.

To reignite the bullish trend, silver must break decisively above $42.97. Such a move would not only negate the bearish pattern but also reopen the path to challenge multi-year resistance at $44.22.

Semiconductor Demand and Dollar Weakness Fuel the Bigger Picture

Despite the recent pullback, spot silver is still up 46.47% year-to-date, narrowly trailing 2020’s 47.7% surge in percentage terms. However, in absolute price terms, silver has already broken above 2020 highs, reaching a 14-year peak. The rally has been fueled by strong demand from the semiconductor sector and safe-haven interest, giving this move similar intensity to the one seen during the peak of pandemic-era uncertainty.

Meanwhile, the U.S. dollar index (DXY) gained 0.20% on Wednesday, offering near-term pressure on metals. But the broader picture remains dollar-negative. Investor pessimism surrounding global trade disruptions and concerns over Federal Reserve independence are driving safe-haven interest into both gold and silver.

Gold’s Rally Offers Support for Silver Bulls

Gold’s year-to-date gain of 38.8%—its strongest performance since 1979—has added momentum to silver. ETF inflows into gold and a bullish forecast from Deutsche Bank have further solidified support. A rising gold price often draws retail interest into silver, perceived as the cheaper alternative play.

The gold-to-silver ratio currently stands at 86, well above its long-term averages of 63 (50-year) and 70 (20-year), according to Dow Jones Market Data. Historically, such elevated ratios have signaled undervaluation in silver, pointing to upside potential if gold continues to outperform.

Silver Forecast: Support in Sight, Eyes on Fed Tone

Traders are bracing for the Fed’s interest rate cut and—more importantly—guidance from Chair Powell. The tone of the Fed will likely determine whether silver finds renewed buying above $41.68 or continues its retreat toward deeper support zones.

A dovish Fed combined with a bullish breakout in gold could trigger renewed upside in silver, targeting $44.22. Conversely, a hawkish surprise could push silver down to retest $40.40 and even $39.01.

For now, silver remains in a correction—but the broader bull case is intact.

More Information in our Economic Calendar.