Silver Faces Turning Point Amid US Dollar Surge. Forecast as of 30.07.2025
The strengthening US dollar suggests that the bullish trend in the XAGUSD pair may be coming to an end. Silver’s recent rally was largely driven by strong investment demand and a weaker greenback. However, the situation shifted at the end of July. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Silver inventories were close to record lows.
- Rising ETF holdings provided tailwinds for the XAGUSD pair.
- Silver plummeted due to the strengthening US dollar.
- If the XAGUSD pair falls below 37.9, consider short trades.
Weekly Fundamental Forecast for Silver
Silver went from glory to gloom almost overnight. Just a week ago, silver was gleaming near a 14-year high, ETF inflows were surging, bullion lease rates in London were spiking, and Citigroup was predicting the asset to reach $43 per ounce within 6 to 12 months. But the moment the US signed a trade deal with the EU, the tide turned. The appreciation of the US dollar was the first nail in the coffin for the XAGUSD pair.
The surge in bullion lease rates in London to 4.5%, well above the typical near-zero levels, signaled a tightening silver market. According to TD Securities, the outflow of physical metal from Europe due to arbitrage has driven inventories down to critically low levels. LBMA free-float reserves have dropped to their lowest point on record. The last time such a dislocation occurred was when investors were rattled by the prospect of the White House imposing tariffs on silver imports ahead of Independence Day. As soon as it was clear it wouldn’t happen, the market calmed down.
Silver Premiums: New York vs London
Source: Bloomberg.
According to Citigroup, silver’s recent gains are not just the result of capital flowing out of an overbought gold market. Silver is fundamentally strong on its own. A fifth consecutive year of deficit, shrinking above-ground reserves, and strong investment demand have underpinned the XAGUSD rally. Holdings in silver-backed ETFs have continued to rise, bolstering silver.
Silver Price and ETF Holdings
Source: Bloomberg.
Nevertheless, silver’s 33% jump to a 14-year high was largely fueled by a more than 10% drop in the US Dollar Index during the first half of the year. Since silver is quoted in dollars, a weaker greenback created ideal conditions for XAGUSD bulls. However, the EU-US trade agreement quickly overshadowed that supportive backdrop.
A stronger greenback is the result of the US victory in the trade war. Instead of worrying about recession and high inflation, markets are now talking about American exceptionalism. Thanks to tariffs and massive investment flows, the US economy is once again looking more resilient than its global peers. As a result, the US dollar index is likely to keep climbing, while silver appears to be on a downward trajectory.
If the Fed continues to resist Donald Trump’s calls for rate cuts, and US data like GDP and non-farm payrolls remain strong, XAGUSD quotes may retreat. As long as the US economy remains strong, the central bank is unlikely to return to monetary policy expansion.
Weekly Trading Plan for Silver
The grounds for a rate cut may emerge in September or October. At that point, silver will be able to regain its footing. For now, consider selling the XAGUSD pair, primarily when it breaks through the support of 37.9.
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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