Silver (XAG) Forecast: Silver Traders Eye $41.40–$38.31 Value Zone as Bulls Step Aside

Silver Slides as Fed Outlook and Liquidity Reset Trigger Positioning Shift

Silver futures (XAGUSD) ended last week at $48.67, shedding more than 6% and breaking a nine-week winning streak. After surging from $28.31 to $54.49 over six months, the market is now undergoing a repricing phase.

The decline reflects a fading bullish narrative following the resolution of a physical supply squeeze and a sharp reversal in speculative sentiment, both of which had fueled silver’s recent parabolic run.

London Liquidity Rebounds, Undermining Bullish Momentum

A key factor behind silver’s pullback has been the easing of extreme tightness in the London physical market. Over 1,000 tons of silver were flown in from the U.S. and China to restock depleted vaults, lowering borrowing costs and collapsing spot premiums. This effectively defused one of the primary catalysts behind the breakout to $54.49.

While global supply remains fractured—highlighted by heavy outflows from Comex and continued Indian demand—London’s return to balance has removed immediate pressure. That shift prompted speculators to exit high-conviction trades, reinforcing the downturn.

Gold Reversal Adds Pressure as Fed Uncertainty Builds

Silver tracked gold lower throughout the week. Spot Gold (XAUUSD) formed a weekly reversal top after hitting a record high at $4381.44, then closing at $4114.12. Despite a softer CPI report—core inflation rising just 0.2% month-over-month—the metals complex struggled as traders recalibrated their Fed expectations.

Markets still price in a 25 basis point cut at the October 28–29 FOMC meeting, which would lower the fed funds target range to 3.75%–4.00%. However, the path beyond October remains unclear. Fed Chair Powell has emphasized labor market risks over inflation in recent comments, but stronger Treasury yields and dollar strength indicate skepticism around a sustained easing cycle.

Without forward guidance hinting at further cuts, gold and silver bulls appear unwilling to re-engage aggressively at current levels.

Weekly Structure Points to Deeper Value Zones

The recent decline marks the first serious test of silver’s extended uptrend. Having rallied nearly 93% from its April low, the market has now pulled back more than 10% from the peak.

Weekly technical levels show the first major retracement support at $41.40—the 50% mark of the April–October rally—followed by $38.31 at the 61.8% retracement. The long-term trend support sits even lower at $35.38, aligning with the 52-week moving average.

These zones represent potential value levels for institutional buyers, though price has not yet tested them.

Outlook: Bearish Bias Holds Until Fed Provides Direction

Silver’s short-term bias remains bearish as traders shift from momentum-driven setups to value-based strategies. With the London squeeze defused and gold reversing, sentiment is fragile heading into a pivotal Fed decision.

While a rate cut this month is largely priced in, the market is demanding clarity on whether additional easing will follow. If Powell signals a one-and-done move or stresses data-dependence without dovish commitment, silver could extend its decline toward the $41.40–$38.31 retracement zone. Conversely, a surprise signal of continued accommodation could reignite interest from both monetary and industrial bulls.

Until that guidance is clear, silver is likely to remain under pressure, with broader volatility anchored to the Fed’s tone.

More Information in our Economic Calendar.