Zero Chance of Rate Cuts! Silver Correction Isn't Over Yet

Summary:

The market widely anticipates that the Federal Reserve will keep interest rates unchanged at this month's policy meeting, which exerts downward pressure on silver prices. In theory, a pause in the Fed's accommodative monetary policy could negatively impact non-yielding assets like silver.

SELL XAGUSD

Close Time

CLOSED

90.807

Entry Price

85.000

93.500

78.722 -0.557 -0.70%

269.3

Pips

Loss

85.000

93.519

Exit Price

90.807

Entry Price

93.500

Fundamentals

Due to the United States' delay in imposing tariffs on critical mineral imports, the asset faces downward pressure. Reuters reports that President Donald Trump instructed Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick on Thursday to negotiate with trade partners to adjust the import of critical minerals to ensure such imports do not threaten national economic security. Silver is no longer solely traded as a hedge against currency fluctuations; by early 2026, it increasingly functions as a strategic commodity influenced by industrial policies and supply chain security, rather than solely by inflation data. This shift stems from Washington's renewed focus on critical mineral resources. The strategic reserve-building concept is expanding from petroleum to metals that power decarbonization, defense technology, and manufacturing autonomy. In this context, silver's significance surpasses traditional market expectations. Its role is not merely symbolic but intersects with energy transition, electronics industry, and geopolitical competition. This positioning confers a premium characteristic on silver, aligning it more closely with strategic metals than with conventional precious metals. Often grouped with gold, silver's demand structure is fundamentally different; a significant and growing portion of global silver consumption is industrial, utilized in solar panels, high-conductivity electronics, advanced circuits, medical components, automotive systems, and defense equipment, due to its irreplaceability without performance degradation. As electrification accelerates, demand shifts from cyclical to structural. This is critical in transforming commodities into strategic assets. When demand is tightly coupled with technological and infrastructural developments, supply issues cannot be remedied by short-term price fluctuations but require capacity expansion, processing capabilities, and time. Consequently, silver exhibits a greater sensitivity to supply chain pressures than gold.

Signs of improvement in the U.S. labor market, coupled with the strong retail sales data released earlier this week, support the Federal Reserve's stance to maintain steady interest rates in the coming months. This, in turn, could provide near-term support to the U.S. dollar. Following the December employment report, Morgan Stanley analysts postponed the market rate cut expectations from January and April to June and September. Chicago Fed President Austan Goolsbee stated on Thursday that, given clear signs of a stable labor market, the Fed should focus on lowering inflation. Meanwhile, San Francisco Fed President Mary Daly indicated that monetary policy is "well-positioned" to respond to economic shifts. Recently, several Federal Reserve officials have reaffirmed a cautious approach; notably, Kansas City Fed President Schmid explicitly opposed rate cuts, citing high inflation and potential new government policies that may further boost demand and tighten supply, exerting upward pressure on prices. Goolsbee and Atlanta Fed President Bostic both emphasized that monetary policy must continue to monitor inflation trends. Currently, interest rate futures imply a 97% probability that the Fed will hold rates steady at the January 27-28 meeting, with expectations of approximately two rate cuts by 2026 remaining unchanged.

Technical Analysis

In the 4H timeframe, Bollinger Bands are constricting, indicating a narrowing of volatility. The SMAs are flat, with the price oscillating around the EMA12. The MACD has exhibited a death cross, followed by a 'death kiss' signal, with the MACD line and signal line currently retracing toward the zero-axis from a distance, suggesting the corrective phase is incomplete. The RSI stands at 58, reflecting a predominantly wait-and-see sentiment among investors. Support levels are aligned near the EMA50 and the midline of the Bollinger Bands, approximately at 84.5 and 88.4 respectively. In the 1D timeframe, Bollinger Bands are expanding upward, and SMAs are diverging ascendingly. After a long lower shadow on yesterday’s candle and a subsequent dip today, it indicates potential correction toward the EMA12. If the price sustains above EMA12, an upward move to test the upper Bollinger Band is possible; failure to hold this level may lead to a decline toward the middle Bollinger Band and EMA50, around 74.5 and 68. The RSI is at 71, indicating an overbought condition. In the short term, while new highs are achieved, the RSI peaks are gradually declining, suggesting a high probability of a market pullback. It is recommended to go short before going long.

Zero Chance of Rate Cuts! Silver Correction Isn't Over Yet_1

Zero Chance of Rate Cuts! Silver Correction Isn't Over Yet_2

Trading Recommendations

Trading Direction: Sell

Entry Price: 91

Target Price: 85

Stop Loss: 93.5

Support: 85, 80, 75

Resistance: 93, 95, 100

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

Zero Chance of Rate Cuts! Silver Correction Isn't Over Yet

Risk Disclosure