Silver Price Outlook: XAG/USD Stays Under $58.00 as the Fed Maintains a Hawkish Stance

Silver came under pressure after three members of the Federal Open Market Committee (FOMC) opposed the consensus decision and favored an interest rate increase. Despite mounting inflation risks linked to escalating tensions in the Middle East, the Federal Reserve opted to keep rates unchanged at 3.5%–3.75%. Meanwhile, geopolitical concerns intensified after President Trump vowed a forceful military response to Iran’s missile strike on US forces stationed in Jordan.

Silver prices (XAG/USD) edged lower during Thursday’s Asian session, slipping to around $57.90 per troy ounce after posting modest gains a day earlier. Nevertheless, the precious metal continues to find support from the Federal Reserve’s latest policy decision and expectations that other major central banks will also maintain a cautious approach to monetary policy.

At its July meeting, the Federal Reserve left interest rates unchanged at 3.50%–3.75%, despite rising inflation concerns linked to renewed tensions in the Middle East. The decision helped support silver prices, as stable interest rates reduce the opportunity cost of holding non-yielding assets. Investors also expect both the Bank of England (BoE) and the Bank of Japan (BoJ) to keep rates unchanged while remaining vigilant about inflation risks.

However, divisions emerged within the Federal Open Market Committee (FOMC). Lorie Logan, Beth Hammack, and Neel Kashkari voted against the majority decision, arguing for a 25-basis-point rate hike. During the post-meeting press conference, Fed Chair Kevin Warsh maintained a hawkish tone, emphasizing that the central bank remains fully committed to returning inflation to its 2% target, even though it will not provide explicit guidance on future rate moves.

The Fed’s policy statement received a 7.4/10 score on the FXS Speechtracker, significantly above its historical average of 4.9/10, reflecting a distinctly hawkish stance. By keeping rates steady while highlighting persistent inflation, resilient economic growth, and strong investment activity, policymakers signaled confidence in the economy and a continued focus on price stability. The 9–3 vote split, with three officials favoring tighter policy, further reinforced expectations that the Fed retains a tightening bias, which could support the US Dollar over the medium term.

Similarly, the FXS Fed Sentiment Index remained elevated at 128.64, indicating that the overall policy outlook continues to favor restrictive monetary conditions. The combination of a strong sentiment reading and a hawkish policy statement suggests that any pullbacks in the US Dollar may remain limited, particularly against major currencies such as the euro and yen.

Meanwhile, geopolitical developments in the Middle East remain a key market driver. President Donald Trump vowed a strong response following a recent attack on US forces in Jordan, while diplomatic negotiations remain deadlocked. The main obstacle continues to be Tehran’s insistence on maintaining control over the strategically important Strait of Hormuz, adding further uncertainty to the global economic outlook.