Silver (XAG) Forecast: Bullish Momentum Gains Traction Amid Fed Rate Cut Optimism

Silver Prices Surge on Fed Rate Cut Speculation

Silver prices surged on Friday, breaching the 50-day moving average of $28.99 as traders increased bets on an imminent Federal Reserve rate cut. The metal is now nearing its August 26 high of $30.19, a level that could trigger further bullish momentum toward multi-month peaks of $31.76 and $32.52. However, weak demand from China and other key Asian markets continues to weigh on the market.

Dollar Weakness Supports Silver Rally

A significant driver of silver’s rise has been the weakening U.S. dollar, which dropped 0.4% against a basket of major currencies. The softer dollar has made silver more attractive for international buyers. Bets for a 50-basis point rate cut by the Federal Reserve increased to 41% from 28% after reports suggested the larger cut remains an option. These reports have sparked fresh buying across commodities, including silver.

The dollar also fell 0.97% against the yen, marking its weakest level since December 2023. With Treasury yields also falling, silver’s appeal as an alternative investment in a low-interest-rate environment has strengthened.

Geopolitical Tensions Add to Bullish Momentum

Silver’s rally has also been bolstered by geopolitical tensions driving investors toward safe-haven assets. Emerging-market central banks continue to build their gold reserves, adding long-term support to the bullish trend. However, the recent price action remains dominated by speculative trading rather than physical demand, with retail buyers in key markets like China and India scaling back purchases due to high prices.

Mixed Sentiment Over Global Economic Conditions

Despite the optimism, silver and gold face headwinds from sluggish demand in Asia, particularly from China. Economic uncertainty in the U.S. continues to cloud the outlook. While traders are pricing in a more aggressive rate-cutting cycle, some analysts remain skeptical, citing the resilience of the U.S. labor market and broader economy.

Short-Term Market Forecast

The short-term outlook for silver remains bullish as traders focus on the Fed’s upcoming rate decision. If the Fed delivers a larger-than-expected 50-basis point cut, silver could surpass the August high of $30.19 and potentially test the $31.76 resistance level. However, any signs of resilience in the U.S. economy or stronger-than-expected demand from China would be key to pushing silver toward the $33-$35 range by 2025. The market’s immediate direction will likely hinge on the Fed’s decision next week and its impact on the U.S. dollar.