Silver (XAG) Forecast: Will Fed Comments Trigger a Bullish Break for Silver?

Silver Prices Supported by Softer Dollar as Fed Decision Looms

Silver prices edged higher on Monday, finding support from a softer U.S. dollar as traders awaited the Federal Reserve’s highly anticipated policy meeting. The Fed is widely expected to announce a 25-basis-point interest rate cut, marking the third reduction this year. Market participants are also focused on updated guidance for 2025, with potential implications for silver demand in a low-rate environment.

At 13:40 GMT, XAG/USD is trading $30.69, up $0.13 or +0.44%.

Resistance Levels Keep Silver in Check

Silver is currently trading below a significant resistance zone at $30.98 to $31.29, a range that could trigger further gains if breached. Upside targets include the 50-day moving average at $31.65. On the downside, traders are eyeing key support levels, including the November 28 low at $29.64 and the 200-day moving average at $29.54, which remains a critical threshold for maintaining the metal’s bullish momentum.

Weaker Dollar Lends Support

The U.S. dollar index dipped 0.1%, easing from its recent two-week high. A weaker dollar makes silver more affordable for holders of other currencies, providing a tailwind for prices. UBS analyst Giovanni Staunovo highlighted the importance of the Federal Open Market Committee (FOMC) meeting this week, noting that UBS projects a 25-basis-point rate cut and further reductions into next year. Staunovo sees silver prices potentially climbing toward $2,900/oz by mid-2025 as interest rates decline.

China Stimulus and Geopolitical Concerns

Economic risks in China and ongoing geopolitical tensions are bolstering silver’s appeal as a safe-haven asset. While China has introduced stimulus measures to boost its economy, weak consumer confidence continues to weigh on industrial demand for silver. Analysts suggest additional Chinese policy support will be essential to sustain demand for the metal.

Fed Guidance Likely to Drive Market

Markets have priced in a 97% probability of a 25-basis-point cut this week, according to the CME FedWatch Tool. Investors are closely watching Fed Chair Jerome Powell’s comments for clues on future rate cuts. Lower interest rates typically enhance the appeal of non-yielding assets like silver, especially as Treasury yields ease.

Market Forecast: Bullish Bias

The outlook for silver remains bullish, driven by expectations of dovish Fed guidance and persistent economic risks. A break above $31.29 could set the stage for further gains, with potential targets near $31.65. However, traders should remain cautious, as downside risks could emerge if the Fed’s comments suggest limited rate cuts in 2025. Short-term volatility may increase as markets react to economic data and Powell’s statements this week.

More Information in our Economic Calendar.