Silver (XAG) Forecast: Silver Market Struggles Below 50-Day MA as Oil Drives Fear

Silver Lower as Oil Prices and Rate Cut Fears Keep Investors on the Defensive

Spot Silver is lower early Friday after the market closed on the weak side of the 50-day moving average for a second session yesterday. All eyes are on the crude oil market, however, since it’s been the catalyst behind the volatile price action this week. Rising oil prices have been driving fears of inflation and delayed rate cuts by the Federal Reserve.

At 07:21 GMT, XAGUSD is trading $83.20, down $0.66 or -0.78%.

Oil Pushes Back Toward $100

Crude oil pushed back toward the $100 per barrel level late in the week after a steep sell-off from Monday’s four-year high. Tensions in the Middle East continued to disrupt energy supply routes, especially around the Strait of Hormuz. This has been the source of volatility along with attempts by the IEA and U.S. to increase supply with releases from their respective strategic petroleum reserves.

The rally in oil is responsible for increasing concerns over inflation across global markets. Roughly 20% of global oil normally moves through that region, so any disruption tends to ripple through energy prices quickly, keeping silver investors on the defensive.

Rate Cut Timeline Keeps Getting Pushed Out

For spot and futures silver traders, the impact of higher oil prices is clear. Higher prices for a prolonged period of time increase the risk that inflation will stay elevated longer than expected. Consequently, this complicates the Federal Reserve’s plans to cut interest rates in 2026.

Earlier in the year, silver prices jumped to a record high as speculative traders bet aggressively on as many as three rate cuts this year by the Fed, but sticky inflation in January and February forced traders to push the first cut out to June. And now, rising energy prices have pushed those expectations further out.

On Thursday, Goldman Sachs said it was now expecting the Fed to cut in September and December. Of course, that all depends on whether the war in the Middle East comes to an end, the Strait of Hormuz reopens and damaged oil infrastructure is repaired quickly.

Industrial Demand Is the Only Floor Under Silver

The bottom line, if crude oil stays near or above $100 and inflation expectations rise further, silver may drive sideways-to-lower as traders may push Fed rate cut expectations deeper into the year. The only thing preventing a complete collapse in silver prices is the strong industrial demand.

The Technical Picture

Technically, the main trend is up according to the daily swing chart, however, retracement zone resistance at $92.87 to $99.66 is capping gains. A trade through $96.43 will signal a resumption of the uptrend. The trend will change to down on a trade through $77.96.

The long-term range is $45.55 to $121.67. The market is currently testing its 50% level at $80.24, signaling a balanced market.

50-Day Moving Average Acting as a Pivot

Another trend indicator is the 50-day moving average at $86.92 today. The market has been tracking both sides of it for nearly two months. We’re treating it as a pivot. Bullish traders are waiting for a catalyst to drive it higher. Bearish traders are using the delayed Fed rate cuts as their catalyst and are trying to drive prices lower.

More Information in our Economic Calendar.