Silver Rally Sustained Near $72.70 as Rate-Cut Bets Strengthen Into 2026

White metal continues to climb as investor optimism around Federal Reserve interest rate reductions gains momentum heading into 2026. The broader USD weakness tied to dovish policy expectations is creating tailwinds for precious metals, particularly those priced in the US currency.

Market Drivers: Policy Expectations Take Center Stage

Market participants are increasingly pricing in the possibility of at least 50 basis points in Fed rate cuts throughout 2026, a more aggressive outlook than what policymakers themselves projected in their latest dot plot meeting. This divergence between trader expectations and official Fed guidance has become a key driver for assets that benefit from lower real yields.

Silver (XAG/USD) currently trades in the vicinity of $72.70 during early European hours. The interest rate backdrop remains supportive for precious metals, as lower borrowing costs reduce the opportunity cost of holding non-yielding assets like silver. When the Fed signals greater monetary accommodation, investors typically shift into inflation hedges, creating natural demand for commodities denominated in weakening currency.

The USD weakness accompanying dovish rate-cut narratives also has implications for cross-currency dynamics. As the US dollar loses ground, commodity-producing economies benefit, which can influence broader emerging market dynamics and even USD to CAD forecasts, given Canada’s commodity-export orientation.

Economic Backdrop Complicates the Narrative

Recent US economic data has presented a mixed picture. Gross Domestic Product unexpectedly accelerated to 4.3% year-on-year growth, exceeding both prior quarter performance at 3.8% and economist forecasts of 3.3%. This stronger-than-anticipated expansion would typically suggest less urgency for rate cuts, yet the silver market has continued its advance regardless.

The reason lies in the market’s belief that growth momentum will moderate later in the cycle, justifying the Fed’s eventual pivot toward more accommodative policy. Incoming data on jobless claims will offer additional clues about labor market resilience, with expectations for Initial Jobless Claims to remain stable at 223,000.

Technical Picture: Stretched But Intact

On the daily timeframe, XAG/USD maintains bullish structure despite overbought readings. The 20-day exponential moving average continues its upward slope with price commanding well above this dynamic support level. The Relative Strength Index (14) has climbed to 80.95, indicating stretched momentum that could warrant near-term consolidation or pullbacks.

Should corrective pressure emerge, the 20-day EMA provides an initial floor around $63.07. Maintaining above this level preserves the broader uptrend, while a breakdown would invite deeper retracement as overbought conditions unwind. The technical setup suggests silver remains supported by structural factors, though short-term volatility risk is elevated given extreme momentum indicators.