Silver Soars After Fed Pause, But Bears Still Lurk

Silver prices have gained momentum after the Federal Reserve announced that it would maintain interest rates at their current level. This decision has provided a boost to precious metals, as the US dollar lost ground and Treasury yields softened. Spot silver rose by about 0.4% to $57.86 per ounce on Thursday, recovering some of Wednesday's significant advance. The Fed's cautious stance suggests that it is focused on bringing inflation back to 2%, which has led investors to reduce their expectations for a September rate hike. As a result, futures pricing now indicates a 63% chance of a rate increase in September, down from 81% prior to the policy announcement.

The precious metal's value has been influenced by its dual role as both a safe-haven asset and an industrial commodity. While silver is often linked with gold during times of geopolitical stress, it also benefits when investors diversify their holdings. The recent US air strikes on Iran have heightened concerns about inflationary risks and prompted investors to add to their hedges. However, the ongoing supply deficit in silver continues to support its long-term prospects. According to The Silver Institute, the annual market deficit is expected to reach its sixth straight year in 2026, with production forecast to grow by only 1.5% despite increased output from mines in various countries.

Despite the current bullish sentiment, there are concerns that a September rate hike could still be possible if upcoming US data releases show above-consensus readings for inflation and GDP growth. This would likely bolster the US dollar and potentially put a cap on silver's upside potential. Technically, silver is at a crucial turning point, with its price challenging the ascending trendline at $56.81. If this level holds, buyers may attempt to retest resistance at $58.83, while a break below could signal the start of a correction to lower levels.