Silver (XAG/USD) traded near $76.50 at the time of writing, down 0.70% on the day. It started the week weaker after it did not extend a recent rebound, with profit-taking linked to a reassessment of US monetary policy after new data.
US inflation slowed in January, based on the Consumer Price Index (CPI). The headline CPI rose 0.2% month-on-month versus 0.3% before, while the annual rate eased to 2.4% from 2.7%.
Fed Policy And Market Expectations
Markets are also watching US labour market strength and the Federal Reserve’s stance. The Fed has not indicated an imminent rate cut, and the CME FedWatch tool shows expectations for no change at the March and April meetings, keeping rates in the 3.50%–3.75% range.
A modest US Dollar rebound has weighed on dollar-priced metals by raising costs for overseas buyers. However, the Dollar’s gains may be limited by expectations of easing later in the year.
Geopolitical risks also remain in focus, with tensions between Washington and Tehran. Reports say the US military is preparing for the possibility of prolonged operations against Iran if the situation escalates.
Looking back to this time in 2025, we recall the cautious sentiment surrounding silver as it hovered around $76.50. The market was correctly focused on the Federal Reserve’s hesitation to cut rates, despite inflation easing to 2.4%. This dynamic suggested that traders should have been wary of long positions, favoring strategies that could profit from range-bound or downward price action.
Shift In The 2026 Outlook
That cautious stance proved correct, as the Fed ultimately held rates steady through the summer of 2025, citing a resilient labor market that consistently added over 220,000 jobs per month through the second quarter. This policy path kept real yields elevated and the US Dollar firm, capping any significant rallies in silver for months. For derivative traders, this period rewarded those who sold call options on rallies or established bearish put spreads.
However, the landscape has now shifted significantly as we enter the first quarter of 2026. The economic resilience seen in early 2025 has faded, with recent reports showing Q4 2025 GDP growth slowing to just 1.3%. The CME FedWatch Tool now indicates a greater than 85% probability of a rate cut in March 2026, a stark contrast to the hawkish hold we saw a year ago.
Furthermore, the geopolitical risks mentioned in 2025 have not subsided, providing a persistent underlying bid for safe-haven assets. More importantly for the coming weeks, industrial demand has accelerated, with recent industry reports showing photovoltaic demand for silver grew by an estimated 15% in 2025. This fundamental support, combined with a dovish Fed, suggests traders should now consider bullish strategies, such as buying call options or bull call spreads, to capitalize on potential upside.
