Silver Price Forecast: Soft US inflation lifts XAG/USD, but downside bias remains
Silver (XAG/USD) trades on the front foot on Tuesday as softer-than-expected US inflation data tempers expectations of a near-term Federal Reserve (Fed) interest rate hike and pushes the US Dollar (USD) lower. At the time of writing, XAG/USD trades around $58.50, up nearly 2% on the day.
Following the data, the probability of a July hike fell to 12% from 40%, while the odds of a September increase eased to 59% from 74%, according to the CME FedWatch Tool.
Hovever, Silver lacks stronger upside momentum. Oil-driven inflation risks are back in focus amid escalating tensions in the Middle East, leaving the door open to a Fed rate hike later this year.
Meanwhile, the technical outlook remains bearish as XAG/USD trades well below its key moving averages, even though momentum indicators are showing early signs that selling pressure is easing.
Technical analysis
In the daily chart, XAG/USD keeps a bearish tone as price holds firmly below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs). The pair remains inside a downward parallel channel, trading just under the upper boundary at $60, while the Relative Strength Index (RSI) at 39 stays in mildly bearish territory.
The Moving Average Convergence Divergence (MACD) indicator, with the line marginally above zero at 0.32, hints at some loss of downside momentum but does not yet challenge the prevailing downside bias given the heavy overhead structure.
On the topside, initial resistance is located at the channel’s upper boundary around $60, followed by the horizontal barrier at $62.50, ahead of a denser cap formed by the 50-day SMA at $69.35 and the 200-day SMA at $70.42, with the 100-day SMA higher up at $73.56 reinforcing the broader bearish backdrop.
On the downside, immediate support emerges at $55.50, with the lower edge of the descending channel near $48.50 acting as a more distant structural floor should selling pressure accelerate.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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