Silver (XAG) Forecast: Fed’s Higher-for-Longer Stance Slams Silver Outlook

Silver Slumps as Fed’s Hawkish Hold Triggers Selloff

Silver markets came under renewed pressure Thursday, falling sharply from recent highs as traders responded to the Federal Reserve’s latest policy stance. After touching $37.32 on Wednesday, silver prices dropped nearly 5% to trade near $35.46 following the Fed’s June 18 decision to hold interest rates steady at 4.25–4.50% while reiterating its commitment to restrictive policy.

The central bank’s tone—widely interpreted as a “hawkish hold”—has shaken risk assets across the board, with silver particularly exposed due to its industrial-heavy demand profile and lack of yield.

At 12:45 GMT, XAG/USD is trading $36.33, down $0.42 or -1.15%.

Why Silver Is Underperforming Gold Post-Fed

While both gold and silver slipped on the Fed’s comments, silver is facing a steeper decline. The metal’s dual role as both a monetary and industrial asset makes it especially sensitive to economic growth concerns. About 60% of silver demand comes from industrial applications—making it vulnerable when the Fed reinforces its inflation-fighting stance with tight monetary conditions.

Unlike gold, which draws safe-haven flows during policy uncertainty, silver suffers from the same fears that boost bond yields. The latest downturn appears driven by profit-taking, as traders who benefited from silver’s recent rally to 11-year highs begin locking in gains under a more hawkish macro backdrop.

Interest Rates Erode Silver’s Appeal

The Fed’s hold at 4.25–4.50% highlights an ongoing preference for high real yields—bad news for non-yielding assets like silver. With investors able to earn over 5% in risk-free short-term Treasuries, the opportunity cost of holding silver continues to rise.

That imbalance weighs on sentiment, particularly as the Fed made clear it is monitoring “labor market conditions, inflation pressures and expectations,” leaving the door open to more policy action if needed.

Stronger-for-longer interest rates have a two-fold impact: they suppress speculative appetite while also curbing industrial growth—both of which are negative for silver prices in the near term.

Key Technical Levels in Focus for Silver Traders

Technically, silver is now testing support around $35.46, with the next downside level seen at $34.87. Breaching that could open the path to further losses. However, Fed language also offered a subtle hedge, noting readiness to adjust policy if economic risks emerge. That caveat may cushion downside moves in silver, especially if future data weakens.

Market Outlook: Patience Required as Volatility Builds

Short-term pressure on silver is likely to continue as long as the Fed holds rates steady and economic data remains firm. However, if signs of a slowdown emerge, silver could quickly rebound given its historical volatility. For now, traders should focus on key support levels and stay nimble—position sizing and discipline will be crucial. While the Fed’s current stance limits near-term upside, silver’s broader case remains alive under ongoing monetary uncertainty.

More Information in our Economic Calendar.