Silver Price Forecast: XAG/USD remains below $58.00 amid Fed hawkish pause

Silver price (XAG/USD) depreciates after registering modest gains in the previous day, trading around $57.90 per troy ounce during the Asian hours on Thursday. However, Silver prices gained following the Federal Reserve’s (Fed) latest monetary policy decision, supported by expectations that other major central banks will follow a similar path.

During its July meeting, the Fed opted to leave rates steady in the 3.5%–3.75% range despite growing inflationary pressures tied to renewed conflict in the Middle East. This decision provided underlying support to Silver, as elevated borrowing costs typically dampen demand for non-yielding assets. Both the Bank of England (BoE) and the Bank of Japan (BoJ) are widely anticipated to keep interest rates on hold this week while maintaining a cautious stance on inflation.

Despite the status quo, internal disagreement was evident within the Federal Open Market Committee. Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed Chief Neel Kashkari all dissented, advocating instead for a 25-basis-point rate increase. In his post-meeting press conference, Fed Chairman Kevin Warsh reinforced a firm tone, noting that while the central bank will refrain from offering explicit forward guidance on future rate adjustments, it remains committed to using all necessary tools to bring inflation back to its 2% target.

The Fed Monetary Policy Statement scores 7.4/10 on the FXS Speechtracker, a clear hawkish tilt relative to the historical average of 4.9/10. By holding the key overnight rate at 3.50%-3.75% while stressing elevated inflation, solid economic activity, and strong productivity and investment, the Fed signals confidence in growth and a firm commitment to price stability. The 9-3 split vote, with three presidents favoring a 25-basis-point hike, underscores latent tightening bias that is supportive of the Dollar on a medium-term horizon.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 128.64, confirming that the overall policy tone remains firmly in hawkish territory. The combination of a high FXS Fed Sentiment Index level and an above-baseline FXS Speechtracker score suggests the Fed continues to lean toward restrictive policy, a backdrop that should keep Dollar dips relatively shallow against the Euro and Yen.

Meanwhile, escalating geopolitical tensions in the Middle East continue to influence global markets. President Donald Trump pledged a decisive response following a recent attack on US forces in Jordan. Diplomatic efforts remain stalled as both sides struggle to reach a compromise, largely due to Tehran’s insistence on retaining control over the strategically vital Strait of Hormuz.