Silver (XAG) Forecast: Rate Cuts & Iran Drive Silver Market Higher Ahead of CPI Data

Silver Surges Toward Record High Despite Rebalancing Headwinds

Spot Silver (XAGUSD) is sharply higher early Monday, challenging the record high at $84.03. The rally follows last week’s strong performance despite the inside move on the weekly chart. Traders have clearly shrugged off the current commodity fund rebalancing that started on January 9 and is scheduled to end on January 15.

Last week, XAGUSD finished at $79.93, up $7.11 or +9.77%.

Geopolitical Risks and Fed Rate Cut Hopes Drive Rally

Short-term, today’s rally is being fueled by geopolitical risks and expectations of multiple interest rate cuts by the Federal Reserve, starting with the March 17-18 meeting. The bullish long-term narrative remains the same: there is a worldwide shortage of silver and demand is extremely strong. The long-term narrative is providing support on dips, while short-term factors are controlling the volatility.

Bulls Prove Resilient Through Margin Hikes and Fund Selling

After five consecutive weeks of gains from mid-November to late December, volatility has hit the market, threatening to derail the rally. However, the bull market has proved its resilience, bouncing back from two margin hikes by the Chicago Mercantile Exchange (CME) in one week and an annual rebalance that may have led to the sale of 12,000 futures contracts worth about $6.8 billion last week. The rebound that began on Thursday after a steep sell-off and the current two-day rally strongly indicate that bullish traders have fully absorbed the margin call and rebalancing pressure.

Weak Jobs Data and Iran Tensions Fuel Fresh Buying

Friday’s Non-Farm Payrolls report and the threat of military intervention in Iran by the United States are the fresh sources of bullish news early Monday.

On Friday, U.S. Non-Farm Payrolls in December rose by 50,000, missing expectations of a 60,000 gain, while the unemployment rate eased to 4.4%, below forecasts of 4.5%.

Silver bulls continued to price in at least two Federal Reserve rate cuts this year, moves that are historically favorable for silver. This notion is being supported by the current poor job creation environment.

Multiple Geopolitical Flashpoints Support Safe-Haven Demand

Geopolitical tensions are also driving renewed demand for silver early Monday. They remain elevated amid intensifying unrest in Iran, expanded fighting between Russia and Ukraine, the arrest and removal of Venezuelan President Nicolás Maduro, and Trump’s relentless pursuit of control of Greenland.

Technical Outlook: Clear Path to New Record Highs

Technically, XAGUSD is in an uptrend with no resistance above $84.03. The nearest support on the weekly chart is a retracement zone at $64.79 to $60.25. It will move higher as the market climbs above $84.03. The only chart pattern to fear at current price levels is a closing price reversal top.

Key Inflation Data on Tap This Week

The big events that could impact silver prices this week are the December Consumer Price Index report on Tuesday and the Producer Price Index report on Thursday.

Traders are forecasting that December CPI ticked higher after a tepid November. They expect inflation to continue to rise during the first half of 2026 because of the impact of tariffs, but to subside during the second half of the year.

Obviously, the Fed would like inflation to go down, but I think they can handle slow growth, especially with the weak labor market. This will support the notion of one rate cut. However, if inflation spikes higher, then silver traders are going to have to reconsider two rate cuts this year.

More Information in our Economic Calendar.