Silver Price Forecast: XAG/USD rebounds strongly to near $32.50 as Fed guides steady policy stance

LONDON (February 18) Silver price (XAG/USD) bounces back strongly to near $32.50 in Tuesday’s European session. The white metal recovers its intraday losses and turns positive despite multiple headwinds, such as firm expectations for the Federal Reserve’s (Fed) ‘higher for longer’ interest rate stance, growing optimism over Russia-Ukraine peace, and easing United States (US) President Donald Trump’s tariff fears.

On Monday, a slew of Fed officials stated that current monetary policy conditions are in great shape, given resilient US economic growth, still-elevated inflationary pressures, and a balanced labor market. Fed Governor Michelle Bowman said she would like to gain “greater confidence” that progress in lowering inflation will “continue” before considering any monetary policy adjustment.

Technically, increasing hopes that the Fed will keep interest rates steady for longer bode poorly for precious metals, such as Silver.

Meanwhile, growing optimism about peace between Russia and Ukraine is expected to keep a lid on Silver’s upside. Last week, Donald Trump confirmed that both leaders of Russia and Ukraine have agreed to peace negotiations and ordered his team to begin truce talks.

Historically, the scenario of improving geopolitical tensions diminishes the appeal of precious metals, such as Silver.

Over that, investors expect Trump’s reciprocal tariffs won’t be as fearful as previously anticipated. Trump didn’t reveal a detailed reciprocal tariff plan on Thursday, while he was expected to do so. The tariff plan is unlikely to come into effect before April as Trump nominated Commerce Secretary Howard Lutnick said on Thursday that the President will be ready to move on reciprocal tariffs by April 1.

Market participants expect US trading partners would have enough time to negotiate with Trump on reciprocity.

FXStreet