Silver Price Forecast: XAG/USD Eyes $60 as Weaker Dollar and Fed Bets Lift Bulls

Silver started the week on a firmer track, edging closer to $60/oz, as traders returned to precious metals after the US-Iran tensions eased, sending crude prices plunging. The resulting weaker oil prices helped dampen inflation anxieties in the near-term and pushed the dollar lower. This created an ideal environment for silver, where its dual role as an investment haven and as an industrial metal saw it outperform gold. With the US central bank (Fed) policy decision on 29-30 July, attention now shifts from geopolitical factors, towards the US monetary policy, Treasury yields and economic data.

Softer Dollar Gives Silver Fresh Momentum

On the flip side, what was the most critical factor on Monday was a softer dollar. With reports that hostilities between the US and Iran had temporarily halted, oil prices were down more than 4%, lowering inflation expectations for any immediate spike. A weaker dollar made dollar-priced commodities more attractive, alongside Treasury yields dropping lower and thus lowering opportunity cost in non-yielding assets like silver. Unlike last week’s trade that was mostly based on safe-haven buying driven by geopolitical events, the move on Monday was driven more by a general improvement in market dynamics rather than renewed safe-haven flows.

Fed Meeting Becomes the Week’s Main Catalyst

Markets now face their biggest macro event of the month. While the Fed is widely expected to leave interest rates unchanged, the focus will now be on what Chair Kevin Warsh will say in his press conference. Will there be any hints of another rate hike in the second half of the year? Expect the market’s attention to turn to:

• US second-quarter Gross Domestic Product (GDP)
• Core Personal Consumption Expenditures (PCE) index
• Employment data
• Treasury yields

In the event the Fed signals further disinflation, the silver sector could be boosted by the dollar falling lower and Treasury yields sliding. A hawkish Fed, on the other hand, would mean the dollar rises, and pressure precious metals.

Industrial Demand Continues to Differentiate Silver

Silver’s long-term investment case is far superior to gold as more than 50% of its annual demand is accounted for by industrial demand. This demand remains strong due to:

• AI data-centres
• Semiconductor manufacturing
• Solar panel production
• Electric vehicles (EVs)
• Consumer electronics

This industrial demand continues despite higher cost of capital and is helping to support prices. At the same time, the Silver Institute is still expecting to see a supply deficit again this year, given that the production at mines is unlikely to catch up with consumption. As it continues to rely on constrained production and growing industrial demand, one of the key silver long-term fundamentals is its strong structural demand growth.

Investors Continue Rebuilding Positions

The silver’s investment case has been bolstered by the recovery in sentiment from the sell-off that has seen the end of last week. ETF flows have stabilised and there are signs of the market gradually rebuilding long positioning ahead of the Fed decision. Although silver is more volatile than gold, the fact that buyers are once more getting into the market suggests that investors have continued to treat corrections as opportunities to take a long view in silver.

Silver Technical Analysis

Silver is currently trading at around $59.35, maintaining its position above the 50-period Exponential Moving Average (EMA) at $58.51 and the 200-period EMA at $59.08 after a dip from last week. The RSI has picked up to about 59, and while the RSI is gaining strength, it has not yet been deemed as overbought.

A sustained move through $59.96 is required to see another leg up to $61.38 and $62.91 respectively. $58.83 is a strong support level for silver. Failure to hold this level could take prices back towards $57.83 and $56.83.

Trade Setup

Bullish scenario: Buy on a sustained move through $59.96

• Target 1: $61.38
• Target 2: $62.91
• Stop-loss: Under $58.80

Bearish scenario: Failure to hold $58.83 could see a retracement back to $57.83 and $56.83.

Key Levels

Support: $58.83 • $57.83 • $56.83 • $55.79 Resistance: $59.96 • $61.38 • $62.91 • $64.01

ABOUT THE AUTHOR See More

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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