Silver (XAG) Forecast: Pullback or Pause? Traders Eye Next Move in Silver Price Future

Silver Retreats After Historic Highs as Rally Shows Signs of Exhaustion

Spot silver posted a historic rally last week, touching $54.49 per ounce—its highest level since 1980—before retreating to end the week in the lower half of the range. This weakness in the weekly close, though not trend-breaking, signals a market entering a profit-taking phase after an eight-week rally that began near $37. The recent surge has been driven by aggressive investment flows, deepening physical shortages, and escalating geopolitical risk.

Last week, XAG/USD settled at $51.91, up $1.63 or +3.25%.

London’s silver inventories continue to dwindle, with available “free float” falling from 850 million ounces in 2019 to just 200 million last week. These structural deficits—five consecutive years of global supply shortfalls—have triggered a persistent short squeeze and even transatlantic air shipments of silver to meet demand. Physical tightness remains acute, especially as industrial recycling volumes lag and Indian import activity remains robust.

Fed Policy and Trade Tensions Fuel Precious Metals Demand

Silver continues to benefit from the broader environment of dovish Federal Reserve expectations and elevated geopolitical risk. Markets are pricing in rate cuts in both October and December, reducing the opportunity cost of holding non-yielding assets. Fed rhetoric has turned increasingly accommodative, while U.S. regional banks report fresh credit stress, boosting investor demand for monetary metals.

Meanwhile, trade war fears have returned to the fore. Trump’s tariff threats and China’s potential retaliatory measures have rekindled demand for safe-haven assets. Silver, straddling the line between industrial and monetary metal, remains uniquely positioned—but it is also exposed. Rising trade tensions may reduce industrial demand, especially if global manufacturing slows.

Gold’s Pullback May Temporarily Weigh on Silver

Gold, which had been leading the precious metals rally, reversed sharply on Friday after reaching record highs. A confirmed closing price reversal top would open the door to a short-term gold correction. This matters for silver, which has closely tracked gold’s bullish momentum in recent weeks. A near-term pullback in gold could stall silver’s upside unless fresh catalysts emerge.

Outlook: Watch $49.81 and Gold’s Next Move

Fundamentally, silver remains in a bullish trend, but correction risk is rising. Weekly technicals point to $49.81 as the first major support. A failure there could trigger broader profit-taking, potentially dragging prices toward $44.22 or even $41.40—the 50% retracement of the recent rally.

With gold under pressure and silver overextended, traders should watch for further confirmation of a short-term top. However, structural deficits and easing policy continue to support the longer-term bull case.

More Information in our Economic Calendar.