Silver Climbs Above $72.70 as Traders Bet on Deeper Fed Rate Cuts in 2026

Silver (XAG/USD) has surged toward the $72.70 mark during European morning trading, driven by strong expectations that the Federal Reserve will implement significant rate reductions in the coming year. Market pricing via CME FedWatch indicates traders assign a 70.6% probability to at least 50 basis points of Fed cuts by end-2026—a notably more aggressive scenario than the central bank’s own projections outlined in the latest Fed dot plot.

Market Expectations vs. Fed Guidance

The recent Fed dot plot communicated a more cautious stance, with officials collectively signaling the Federal Funds Rate should settle around 3.4% through 2026, suggesting limited room for multiple rate cuts. This gap between market pricing and official guidance has become a key driver of sentiment. Lower interest rates historically support non-yielding precious metals like silver, as investors seek alternatives to fixed-income assets.

The discrepancy reflects trader conviction that economic conditions may force the Fed’s hand toward more aggressive easing than officials currently envision. This dovish bias has created tailwinds for bullion markets.

Economic Data Backdrop

Recent US economic reports paint a mixed picture. Q3 GDP delivered a surprise acceleration, expanding 4.3% year-over-year—substantially above both the prior quarter’s 3.8% pace and economist expectations of 3.3%. This stronger-than-anticipated growth provides justification for the Fed’s cautious stance on rate cuts, yet markets remain focused on the forward-looking scenario where growth eventually moderates.

Attention now shifts to Initial Jobless Claims data due at 13:30 GMT on Wednesday, with economist consensus expecting claims to hold steady at 223K. Labour market resilience could reinforce the Fed’s measured approach, though any surprising weakness could reignite rate-cut wagers.

Technical Landscape for XAG/USD

On the daily timeframe, XAG/USD trades near $72.19 with the 20-day exponential moving average (EMA) sloping positively and price positioned well above it—a classic bullish configuration. The uptrend remains supported by this dynamic floor, which currently sits around $63.07.

The Relative Strength Index (RSI) has climbed to 80.95, deep into overbought territory. While extreme readings can signal stretched momentum and potential consolidation ahead, they do not necessarily forecast reversals in sustained trends. Should profit-taking emerge, the 20-day EMA would likely cushion any pullback. A decisive break below that support would signal deeper retracement as the overbought condition unwinds, with further losses exposing broader technical damage.