The persistent shortage in the physical silver market and its role as a hedge against macroeconomic risks outweigh the downside factors. Even the latest inflation report has failed to derail the XAG/USD rally. Let's discuss this in more detail and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- Silver prices rose due to higher interest rates.
- Rising US inflation failed to rattle the XAG/USD.
- Precious metals serve as a hedge against macroeconomic risks.
- Long trades on silver can be opened with targets of $89 and $94.
Weekly Fundamental Forecast for Silver
The acceleration of inflation in the US has only temporarily slowed the rally in XAG/USD quotes. This seems unusual, as under such conditions the Fed and other central banks typically prioritize monetary tightening, which deprives the precious metal of its key advantage—the debasement trade. At the same time, rising economic uncertainty could put pressure on industrial demand for silver. However, the market does not appear to be panicking.
Precious metals rallied amid rumors that India would raise import duties, a move later confirmed. New Delhi is in a difficult position, as a widening current account deficit and capital outflows continue to pressure the rupee. The central bank has attempted to defend the currency through interventions, which have reduced reserves to $690.7 billion. This level is still sufficient to cover 10–11 months of imports, a significant share of which is gold. Gold imports in 2025 totaled 710 tons.
India's Top 5 Imports
Source: Bloomberg.
Other precious metals have also come under pressure, with tariffs on gold and silver rising from 6% to 15%, and on platinum from 6.4% to 15.4%. Such measures could lead to an increase in smuggling, as has happened before. Demand from India remains high and is one of the factors contributing to the six-year deficit in the silver market. In order to offset this, the XAG/USD should rise further.
Against this backdrop, investors are focusing more on silver’s role as a hedge against macroeconomic risks than on the impact of economic uncertainty on industrial demand. This shift is supporting sentiment in the precious metals market. At the same time, rising volatility is increasing the risk of reversals in major ETFs.
Volatility and Reversal Risk Trends for iShares Silver Trust
Source: Bloomberg.
The main risks to the global economy from the Middle East conflict are tied to stagflation and recession. On paper, a slowdown in GDP alongside rising inflation is negative for gold and silver. Markets are pricing in tighter monetary policy expectations, with bond yields rising and currencies strengthening.
In fact, central banks risk making mistakes by raising rates. Economies will weaken further, and the risks of recession will increase. A downturn is perfect for a rally in XAG/USD quotes. In this scenario, the chances of large-scale monetary stimulus increase.
Weekly Trading Plan for XAG/USD
Silver is trading in a clear uptrend. Due to ongoing physical supply shortages and silver's role as a hedge against macroeconomic risks, traders can open long positions on the XAG/USD in the medium- and long-term. Potential upside targets are $89 and $94, as previously noted. In the short term, a stronger US dollar could create pressure on silver prices, but any pullbacks may present opportunities to build long positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAGUSD in real time mode
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