Silver (XAG) Forecast: Tariff Confusion and Hawkish Fed Talk Cap Silver Prices Today

Profit-Taking and Mixed Signals Drag Silver Lower

Spot Silver fell on Tuesday as investors took profits after last week’s rally, as a variety of factors continued to weigh on silver, including changing monetary policy, uncertainty about tariffs and a surprisingly small safe-haven response to the ongoing Middle Eastern conflict.

Fed Hawks Take the Wheel

The biggest influence on silver may have actually come from the Federal Reserve. Chicago Fed President Austan Goolsbee said that it is unwise to reduce interest rates until inflation is back under the Federal Reserve’s desired 2 percent target, which was echoed by Fed Governor Christopher Waller yesterday. Waller’s hawkish comments sent the U.S. dollar higher, which capped foreign demand for dollar-denominated silver. In addition, the chances for a June rate cut dropped from 50.2 percent last week to 43.9 percent today, and the short-end of the Treasury yield curve (2 years and shorter) increased slightly.

Tariff Chaos Keeps Markets Guessing

In my opinion, confusion has swirled around tariffs since Friday as a new layer was added when Trump’s use of the International Emergency Economic Powers Act (IEEPA) was overturned by the Supreme Court in February. Thereafter, on March 1st, the White House announced that it will impose a 15% global tariff via Section 122, thus putting markets on edge once again. With uncertainty about how long tariffs might be imposed, whether/where tariffs might be stopped in their tracks by either legal action or congressional challenges, and the total tariff cost may be key factors underpinning silver.

Middle East Tension Lifts Gold, Not Silver

Surprisingly enough, silver hasn’t benefitted from the chaos taking place in the Middle East; the noise from tariffs has inflated gold prices at a far greater rate than its effect on silver. As such, the ongoing diplomatic effort between the United States and Iran has not created any notable rise in the price of either gold or silver as compared to the high prices seen just a few weeks ago; because of its industrial use, silver does not always respond positively to geopolitical tension just like gold.

China Weakness Compounds the Selling

Sentiment surrounding the Chinese industrial sector continues to weaken which has contributed to the recent decline in silver prices, and coupled with profit taking after last week’s +4% price rally, has led to further weakness. Regardless of today’s price drop, silver is still up nearly 24% year-to-date and if the Iran nuclear negotiations break down or if new tariff shocks were to continue or be re-initiated, silver could see dramatic spikes in demand and consequently prices.

Technical Outlook: Support Levels in Focus

Late in the session, XAGUSD is trading $87.21, down $0.98 or -1.10%. The market is holding well above a key 50% level at $83.61 and the most important 50-day moving average at $82.72. As long as it remains above these support levels, it has a clean shot at resuming the rally on Wednesday with short-term targets a $92.20 top and a 50% level at $92.87. A failure to hold the 50-day MA could put the market back into a range with support at $74.63.

More Information in our Economic Calendar.