Silver rose to about $76.60 per troy ounce in early European trading on Friday, after dropping 11.5% in the previous session. Even with the rebound, it was on track for a third straight weekly decline as volatility stayed high. Thursday’s selloff had no clear single cause. But losses in stocks and cryptocurrencies pointed to broad, forced selling across markets. Systematic and algorithm-driven trading flows may also have amplified the move.

Inflation Data And Fed Expectations

Markets are watching upcoming US inflation data for clues on Federal Reserve policy. Headline CPI is expected at 2.5% (down from 2.7%), while core CPI is seen at 2.5% (down from 2.6%). The CME FedWatch tool showed nearly a 92% chance the Fed would keep rates unchanged in March, up from 82% a week earlier. Markets were also pricing in about two 25-basis-point rate cuts by year-end, with the first cut expected in June. Safe-haven demand eased after Donald Trump said talks with Iran could continue for up to a month. That lowered near-term fears of military action, as the US signaled it would keep pursuing a diplomatic path on Iran’s nuclear programme. At this point in 2025, silver was extremely volatile. Prices bounced back to around $76.50 after a sharp, unexplained 11.5% plunge. That fall was part of a broader market-wide liquidation. It also showed how systematic trading flows can overwhelm fundamentals without warning. With no clear catalyst, uncertainty for traders was high.

Positioning And Strategy For 2026

In February 2025, markets were betting that cooling inflation would let the Fed start cutting rates, with the first move expected in June. But core CPI stayed above 2.8% through Q3 2025. The Fed then kept rates steady much longer than investors expected, which limited silver’s upside for most of the year. As a result, silver spent much of 2025 trading in a range. A stronger dollar—driven by the Fed’s more hawkish stance—kept pressure on the metal. Industrial demand helped set a floor, especially demand from the solar sector, where silver use rose about 5% year over year. Geopolitical tension with Iran briefly supported prices, but the situation cooled and did not provide lasting support. Now the setup looks clearer than the chaotic backdrop of last year. January 2026 CPI fell to a two-year low of 2.4%, and the Fed has signaled a more defined path toward easing. CME FedWatch pricing now shows a 75% chance of a first rate cut by May 2026. This shift suggests investors may want to position for potential upside in silver, since lower interest rates reduce the opportunity cost of holding a non-yielding asset. Unlike last year’s forced liquidations, today’s volatility may be more directional. Building exposure through long call options or bull call spreads could be a sensible way to target gains while limiting risk. Industrial demand also remains a strong tailwind. Global manufacturing PMI data for January 2026 showed expansion for a third straight month, supported by green energy initiatives. This demand backdrop may help support prices and reduce downside risk for bullish derivative strategies in the weeks ahead. Create your live VT Markets account and start trading now.

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