Silver Price Outlook: XAG/USD Slides Toward $30.30 as Fed Signals Fewer Rate Cuts in 2025

Key Highlights:

• Silver prices drop to a two-week low of $30.30 during Tuesday’s European session.
• The decline comes as US bond yields extend gains ahead of the Federal Reserve’s (Fed) policy decision on Wednesday.
• The Fed is expected to reduce rates by 25 basis points (bps) to 4.25%-4.50%, but its outlook may indicate fewer rate cuts in 2025.

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Market Drivers

1. Rising US Bond Yields
   • 10-year Treasury yields climb for the seventh consecutive day, nearing 4.42%.
   • Higher bond yields increase the opportunity cost of holding non-yielding assets like Silver, pressuring prices further.
2. Hawkish Fed Expectations
   • According to a Bloomberg survey, the Fed is expected to implement a gradual rate-cutting cycle, with three rate cuts projected in 2025.
   • Economists are focusing on rising inflation risks over potential employment concerns, influencing the Fed’s cautious stance.
3. US Dollar Strength
   • The US Dollar Index (DXY) gains traction around 107.00, adding to Silver’s downside pressure.
4. Fed Chair Powell’s Press Conference
   • Investors await insights from Powell on the potential impact of policies from incoming US President Donald Trump, including immigration, trade, and tax measures, on inflation and future interest rates.

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Technical Analysis

• Current Trend: Silver prices remain under pressure after breaking below the 20-day Exponential Moving Average (EMA) at $31.00.
• RSI Reading: The 14-day Relative Strength Index (RSI) is range-bound between 40.00-60.00, suggesting limited directional momentum.

Key Levels to Watch:

• Support: The upward-sloping trendline near $29.50, originating from the February low of $22.30, is critical for sustaining the current trend.
• Resistance: Horizontal resistance at $32.50, derived from the May 21 high, remains a significant barrier to upside moves.

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Conclusion

Silver prices are likely to remain subdued in the near term, with rising bond yields and Fed policy expectations adding downward pressure. Investors will closely monitor Powell’s remarks for clues on future monetary policy, inflationary trends, and their potential impact on Silver. A break below $29.50 could signal further declines, while a recovery above $32.50 might revive bullish momentum.