Silver(XAG/USD) Short-term outlook: Geopolitical tensions and Fed uncertainties push for a re-test of all-time highs

Geopolitical tensions are driving safe-haven asset demand, and silver prices continue their bullish trend. On Tuesday morning in Europe, XAG/USD remains near $85.75, maintaining upward momentum and testing the all-time high upside. The upcoming US December CPI release is identified as a key variable in determining the short-term direction, and the dollar outlook is expected to significantly influence the future trajectory of the silver market.

Geopolitical risks are fueling safe-haven asset preference

Currently, the worsening situation in Iran is stimulating risk-averse sentiment among investors. Reports indicate that fatalities have occurred amid ongoing civilian protests in Iran, and the Iranian Foreign Minister has emphasized the control of security forces while also pointing to possible involvement by Israel and the US. Such uncertainties are prompting investors to flock to safe assets like gold and silver, driving up spot prices. In particular, silver, with a smaller market size compared to gold, may react more sensitively to risk-off movements.

Fed independence concerns emerge as a new variable

Concerns over the political independence of the US Federal Reserve are emerging as a new risk factor in the metals markets. Fed Chair Jerome Powell stated on Sunday that the US Department of Justice had issued a subpoena to the Fed and mentioned the possibility of criminal charges related to the June congressional testimony building renovation. Powell interprets this as a pretext for pressure to cut interest rates, reflecting fears that external interference could threaten the Fed’s policy independence. Julius Baer Group analysts assess that increased political intervention in the Fed by 2026 could be a key factor driving a bullish trend in the precious metals market.

Dollar outlook will determine short-term inflection point for silver

The US December CPI release scheduled for Tuesday is expected to be a decisive factor influencing the short-term dollar outlook and the direction of silver prices.

If CPI exceeds expectations:
A stronger dollar trend is likely to intensify. Since the dollar is the standard currency for international spot prices, a dollar rally could exert downward pressure on XAG/USD. Expectations of interest rate hikes could also limit silver’s upside attempts.

If CPI falls short or signals easing:
Expectations of easing in the interest rate path could lead to a weaker dollar. In this scenario, silver may continue testing its all-time high above $85.50.

Currently, silver(XAG/USD) remains resilient amid dual safe-haven demand driven by geopolitical risks and Fed independence concerns, with its future direction likely to be determined by CPI data.