Silver Price Forecast: XAG/USD Rebounds Toward $57 as Bulls Eye Trendline Breakout

Silver price forecast remains neutral as XAG/USD opened Monday’s session near $56.80 after declining over 6% last week. It recovered from an intraday low of approximately $55.40. Short-term fundamentals have not weakened with demand for physical silver remaining strong. The long-term fundamentals have not shifted with this latest downside as this correction reveals the market’s readjustment of the US monetary policy.

This is an unusual time for the silver market. Traditionally, increased tensions and conflict around the world shift supply and demand in favor of precious metals. Specifically with the conflict between the US and Iran, oil has jumped in price, pulling inflation up. This likely adds to the expectation that the Federal Reserve will have to leave real interest rates negative for an extended period and keep the Federal Funds rate high.

Oil Above $90 Becomes Silver’s Biggest Headwind

Brent crude climbed above $90 per barrel on Monday as fighting between the United States and Iran intensified and shipping through the Strait of Hormuz remained restricted. Higher oil prices increase transportation and manufacturing costs, creating renewed inflation pressure across the global economy.

For silver, that’s a problem.

Unlike bonds, silver generates no yield. As Treasury yields rise and the US dollar strengthens, investors have greater incentive to hold interest-bearing assets instead of precious metals. The US Dollar Index traded near 100.84, while futures markets now price roughly a 60% probability of a Federal Reserve rate hike by September, with expectations for another move by year-end continuing to increase.

Why Geopolitical Risk Isn’t Helping Silver

Despite escalating conflict in the Middle East, silver has struggled to attract traditional safe-haven buying.

Markets currently view the conflict primarily as an inflationary energy shock rather than a broader financial crisis.

Last week demonstrated this perfectly. Silver fell around 3.6%, while gold also declined as higher oil prices pushed Treasury yields higher and strengthened expectations for tighter US monetary policy.

Unlike gold, silver also depends heavily on industrial demand, making it more vulnerable if expensive energy slows manufacturing activity.

Softer Inflation Still Offers Hope

Not all the news has been bearish. June US inflation surprised to the downside, with headline CPI slowing to 3.5% from 4.2%, while producer prices unexpectedly fell 0.3% month-over-month. Those reports initially boosted silver by weakening the dollar and reducing immediate rate-hike expectations.

However, investors now question whether lower inflation can continue if oil prices remain elevated through July and August. The Federal Reserve is still expected to leave rates unchanged at its July meeting, but policymakers are likely to keep the door open for further tightening if inflation accelerates again.

Physical Supply Remains Tight

Silver’s long-term supply story remains constructive.

According to the Silver Institute, the market is expected to record its sixth consecutive annual supply deficit during 2026, with demand once again exceeding mine production and recycled supply.

Most silver is produced as a by-product of copper, zinc and gold mining, limiting producers’ ability to rapidly increase output even when prices rise.

Those repeated deficits continue reducing above-ground inventories, providing important long-term support.

Industrial Demand Faces New Challenges

While investment demand remains relatively healthy, industrial consumption has softened. Solar manufacturers continue searching for ways to reduce silver usage by adopting thinner conductive layers and experimenting with copper-based alternatives.

Silver remains difficult to replace because of its superior electrical conductivity, but ongoing substitution efforts represent one of the largest medium-term risks for demand. Meanwhile, India has tightened its silver market after raising import duties and restricting imports, pushing local premiums to six-month highs and supporting physical demand.

📺 Watch My Silver & Gold Analysis

If you’d like to see how these technical levels developed, watch my previous market breakdown covering the latest US inflation data and precious metals outlook:

▶️ US CPI Inflation Data! Technical Outlooks for Gold & Forex | July 14

And don’t miss my LIVE market session on July 21, where I’ll cover the latest housing data along with fresh technical outlooks for Gold, Bitcoin and major Forex pairs:

▶️ Housing Data + Technical Outlooks | Gold, Bitcoin & Forex | July 21