Silver Price Eyes $58 as Fed Pause Sparks Rally but Bears Aren’t Done Yet

Silver (XAG/USD) rose on Thursday after the Federal Reserve held interest rates steady, providing a boost to the precious metals as the US dollar lost ground and Treasury yields softened. Spot silver gained about 0.4% to $57.86 per ounce, recovering some of Wednesday’s over 3% advance, after traders reduced the odds of the US central bank increasing rates at its September gathering.

While the prospect of lower interest rates has strengthened the short-term bullish case for precious metals, silver is currently playing two different roles. In addition to its role as a safe-haven asset, the metal is highly dependent on industrial demand from the solar panel, data centre, EV and electronics sectors, which means its long-term prospects are tied not only to monetary policy but also to manufacturing activity around the world.

Fed Holds Rates, Weakening Dollar Supports Silver

The Federal Reserve announced on 29 July that it had kept interest rates unchanged during its July 28-29 policy meeting. Fed Chair Kevin Warsh added that the committee was focused on bringing inflation back to 2%.

Despite the central bank maintaining its cautious stance, investors took the policy statement as a bit softer than anticipated. Futures pricing now suggests there is a 63% chance of the Fed raising rates in September, compared with 81% prior to the policy announcement.

That shift in market expectations was quickly reflected in the price of precious metals, since lower interest rates mean it is cheaper to hold non-interest-bearing assets like silver and gold.

Investors will be watching upcoming US data releases later today, including the June PCE Price Index, which represents the Fed’s preferred measure of inflation, and the preliminary figure for Q2 GDP. Above-consensus readings could fuel bets for further tightening from the Fed, bolstering the US dollar and potentially putting a cap on silver’s upside potential.

Safe-Haven Demand Returns Amid Middle East Tensions

Silver also found support from additional US air strikes on Iran that renewed geopolitical worries. While gold typically serves as the go-to safe-haven during times of geopolitical stress, silver often benefits when investors diversify their precious-metal holdings. Increasing oil prices and heightened geopolitical risk have once again highlighted inflationary risks and prompted investors to add to their hedges.

Yet, that link may be complicated. Extended geopolitical friction would likely continue to support safe-haven demand for silver. But ongoing inflation could also keep real rates higher, assuming the Fed eventually resumes rate hikes.

Gold and #silver are more connected than ever. Our latest report shows a strong, increasingly stable correlation between the two metals, reinforcing their role as linked monetary assets.

Read more: https://t.co/mAePeyl5rl pic.twitter.com/YWtHDQI1cm

— The Silver Institute (@SilverInstitute) July 29, 2026

Supply Deficit Continues to Support Long-Term Outlook

Aside from short-term monetary policy, the most important fundamental factor supporting silver is the ongoing supply shortfall. Silver’s annual market deficit is expected to reach its sixth straight year in 2026, according to The Silver Institute. While supply is forecast to grow about 1.5% to a near-decade high of 1.05 billion ounces, output is still expected to lag behind demand.

Production will likely see a small gain as mines in Mexico, China, Canada and Morocco ramp up operations. Yet, almost three-quarters of global silver comes out of copper, zinc, lead and gold mining, meaning it would take more than price increases to significantly boost output. That ongoing supply shortage should help sustain silver over the longer term, regardless of cyclical pullbacks in prices.

AI Infrastructure Offsets Slowing Solar Demand

Industrial demand is mixed. Fabrication of industrial items is expected to drop about 2% to around 650 million ounces in 2026, said The Silver Institute. This is due partly to solar-cell manufacturers using less silver in their products. Improvements in manufacturing techniques and the use of alternative materials have made solar panels more efficient while also requiring less silver.

The solar industry is one of silver’s biggest consumers, but the drop in silver intensity has slowed demand as global deployment of solar energy continues to increase.

Conversely, some new sectors continue to help underpin demand. Artificial intelligence, cloud computing, consumer electronics, electric cars and grid modernization all need silver to handle electricity and heat.

Investment demand remains strong. Demand for physical silver in the form of bars and coins should increase about 20% to roughly 227 million ounces in 2026, reaching its highest level since 2023 as investors look to protect themselves from inflation and geopolitical turmoil.

Silver Technical Analysis: $56.81 Trendline Holds the Key

Silver continues its consolidation within a narrowing range as sellers repel a breakout attempt at $58.00. Today’s session, the price is challenging the ascending trendline at $56.81, alongside the 50% Fibonacci level ($56.80) and the 61.8% retracement ($57.29). This overlapping area forms a critical support zone that could dictate silver’s next direction.

XAG/USD is still trading below the 200 EMA ($61.14), suggesting that the broader trend is bearish. Moreover, silver continues to be suppressed by the descending trendline from June 23.

The RSI indicator is hovering around 43, pointing to weakening bullish pressure but not yet approaching oversold conditions. If silver drops below $56.81, it could open the way for further declines to $56.32 and $55.72. Meanwhile, a daily close above $58.83 would indicate the possibility of a reversal, with prices moving towards $59.96 and potentially up to the 200 EMA at $61.14.

Resistance: $58.00, $58.83, $59.96, $61.14

Support: $56.81, $56.32, $55.72

Silver Outlook

Despite the recent pullback, silver’s fundamentals remain positive. Factors such as a declining US dollar, persistent supply shortages, and strong industrial demand, driven by AI and electronic applications, provide underlying support.

The US central bank’s decision to hold rates steady is likely boosting sentiment in the short run. However, it remains to be seen whether a September rate hike is becoming less likely following the release of upcoming inflation and GDP figures.

Technically, silver is at a crucial turning point. If the $56.81 trendline holds, buyers can aim to retest resistance at $58.83. On the other hand, a break below this level could signal the start of a correction to lower levels.

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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