Silver Bull Extends Momentum: XAG/USD Targets $72.70 Amid Fed Rate-Cut Outlook

Silver’s bullish momentum accelerates as XAG/USD approaches the $72.70 level, propelled by strengthening expectations that the Federal Reserve will implement substantial interest rate cuts throughout 2026. Market data reveals traders are pricing in a 70.6% probability of at least 50 basis points in Fed rate reductions next year—a notably more aggressive scenario than the central bank’s own December projections.

Fed Expectations Drive Silver Bull Rally

The divergence between market pricing and official Fed guidance has become a key driver for precious metals strength. The Federal Reserve’s dot plot signaled only modest easing, with policymakers expecting the Federal Funds Rate to settle around 3.4% by end-2026, implying minimal rate cuts. However, the CME FedWatch tool paints a different picture, with traders betting on significantly deeper policy accommodation.

This disconnect matters considerably for silver investors. Lower interest rates reduce the opportunity cost of holding non-yielding assets like silver, historically making the white metal more attractive. As Fed dovish bets intensify, capital flows into precious metals typically accelerate.

Economic Data Adds Complexity to Rate-Cut Narrative

Wednesday’s early European trading session witnessed silver extending its uptrend despite a surprising economic print. US third-quarter GDP expanded at an annualized pace of 4.3%, exceeding consensus estimates of 3.3% and outpacing Q2’s 3.8% growth. The stronger-than-expected economic data typically creates hawkish headwinds for rate-cut bets, yet silver’s bull run remained intact.

This resilience suggests that dovish Fed expectations are firmly entrenched in market positioning. Upcoming Initial Jobless Claims data (scheduled for 13:30 GMT) will test this conviction, with markets anticipating claims remained flat at 223K.

Technical Setup Supports Further Upside, With Caveats

XAG/USD currently trades near $72.19, with the 20-day exponential moving average displaying a positive slope and acting as dynamic support. Price consolidation well above this key level reinforces the silver bull thesis, confirming buyers’ willingness to defend higher ground.

However, the RSI (14) indicator has reached 80.95, signaling overbought momentum that warrants caution. Historically, readings above 80 often precede consolidation or pullbacks as stretched conditions normalize. Should momentum deteriorate, the 20-day EMA around $63.07 represents the next meaningful support level.

Traders should monitor this dynamic floor carefully. As long as XAG/USD remains above $63.07, the uptrend structure stays intact. A breakdown below this level would expose deeper retracement risks as overbought conditions unwind and technical selling intensifies.

The silver bull narrative hinges on sustained Fed dovish positioning—any repricing of rate-cut expectations could quickly reverse gains, making economic data and policy communications critical watches for the week ahead.