Silver Price Forecast: Uncertainty over Fed outlook accompanies XAG/USD fall below $53.50

• Silver remains close to one-year lows after the Fed left interest rates unchanged and provided little clarity on the policy outlook.
• Citing continued expansion in overall economic activity, the Fed left interest rates at 3.75%–4.00%.
• With the economy still strong, Fed Chair Warsh reiterated the commitment to price stability and the 2% inflation target.

Downward pressure persists on Silver (XAG/USD), which is trading near $53.30 per troy ounce in Thursday's Asian session as losses stretch into a second consecutive day. The metal is hovering close to one-year lows after the US Federal Reserve left interest rates unchanged, a decision widely expected by market participants. Limited clarity from the central bank on when its next policy adjustment might come, and the path it could take, continues to weigh on the precious metal.

Citing an economy that continues to expand, the Federal Reserve maintained interest rates at 3.75%–4.00%. Its statement pointed to sustained domestic spending, strong capital investment and robust productivity growth. On the employment side of its mandate, the Fed noted that job creation has matched growth in the workforce, with little movement in the unemployment rate.

Although the Fed recognised that inflationary pressures remain elevated, it opted to hold off on further rate increases while collecting more data and evaluating the appropriate monetary policy stance. Two officials opposed the decision: Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, both of whom favoured an immediate rate hike.

Stressing the strength of the underlying economy, Fed Chair Kevin Warsh reiterated the Federal Open Market Committee's commitment to price stability and its 2% inflation goal. He also set out the future monetary policy calendar. The Fed will conduct eight meetings next year, one of them without a formal vote, while Warsh expects six policy-setting meetings in 2028.

For a clearer indication of the monetary policy path ahead, traders are looking to the forthcoming US Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation.

Fresh diplomatic efforts to prevent the Middle East conflict from escalating further are also on market participants' radar. Oil prices nevertheless remain persistently high, sustaining inflation worries and reinforcing expectations that interest rates will stay elevated for longer. Such a high-borrowing-cost environment is difficult for Silver, since higher yields and continued interest-rate pressure tend to undermine precious metals that offer no yield.

Why Are Systematic Flows Shifting From Silver to Base Metals?

Commodity Trading Advisors have been adjusting their metals exposure through recent systematic trading activity, according to TD Securities. As the bank put it, “in metals markets, CTAs are sellers of silver and buyers of zinc and lead on the day.” The rotation highlights a split in positioning flows between precious and base metals: investors are reducing silver exposure while selectively increasing holdings of industrial metals, including zinc and lead.