Silver Price Prediction: XAG/USD Drops to Three-Month Low Around $29.50

Silver Prices Drop to Three-Month Low at $29.26 Amid Fed’s Hawkish Outlook

Silver prices (XAG/USD) hit a three-month low of $29.26 per troy ounce on Thursday, extending their decline for a sixth consecutive session. The grey metal has depreciated over 3% since the Federal Reserve’s (Fed) interest rate decision on Wednesday, signaling further challenges for non-yielding assets like silver.

The Federal Reserve implemented a 25 basis point (bps) rate cut during its December meeting, reducing the benchmark lending rate to a range of 4.25%-4.50%—the lowest in two years. However, Fed Chair Jerome Powell emphasized a cautious approach to further rate reductions, citing persistent inflation above the central bank’s 2% target.

The Fed’s updated Summary of Economic Projections, or “dot plot,” now foresees only two rate cuts in 2025, down from the four predicted in September. This adjustment reflects strong U.S. GDP growth and lingering inflation, keeping interest rates higher for longer and weighing on demand for silver.

In the coming hours, market participants will closely monitor U.S. initial jobless claims, existing home sales, and the final Q3 GDP annualized figures. These data points could provide further insights into the Fed’s monetary policy trajectory.

Meanwhile, the Bank of Japan (BoJ) maintained its short-term interest rate target between 0.15% and 0.25% following its latest monetary policy review. Traders also expect the Bank of England (BoE) to hold rates steady later today, aligning with market expectations.

Adding to silver’s challenges, the industrial outlook remains under pressure. Overcapacity in China’s solar panel industry has led photovoltaic companies to adopt a government-backed self-discipline program aimed at regulating supply, potentially limiting industrial demand for silver.

Silver continues to face headwinds from hawkish central bank policies and evolving global economic conditions, signaling further volatility in the near term.