Silver Price Forecast: XAG/USD sees fresh downside leg below $60 amid hawkish Fed bets
- Silver price refreshes six-month low at $60.74 as the Fed is expected to raise interest rates this year.
- The CME FedWatch tool shows that the Fed will deliver at least two interest rate hikes this year.
- Investors await the US PCE Inflation data, which will be released on Thursday.
Silver price (XAG/USD) posts a fresh over six-month low at $60.74 during the Asian trading session on Wednesday. The white metal faces selling pressure as traders seem confident that the Federal Reserve (Fed) will deliver at least two interest rate cuts this year.
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 86%. This is a sharp turnaround from two interest rate cuts projected before the onset of the Middle East war, which led to a significant increase in inflationary pressures.
Theoretically, higher interest rates by the Fed bode poorly for non-yielding assets, such as Silver.
Meanwhile, the rising US Dollar (USD) due to hawkish Fed bets is also hurting the Silver price. At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 101.50, the highest level seen in over a year. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
For more cues on the United States (US) interest rate outlook, investors await the Personal Consumption Expenditure Price Index (PCE) data for May, which will be published on Thursday. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% Year-on-Year (YoY) from 3.3% in April.
Silver technical analysis
Bias: XAG/USD trades lower at around $61.00, extending a bearish near-term bias as price holds well below the 20-day Exponential Moving Average (EMA) at $68.09.
Momentum: The metal continues to slide away from recent highs, and the Relative Strength Index (14) at 31.92 hovers just above oversold territory, suggesting persistent downside pressure even as the selloff begins to look stretched.
Support: The Silver price is expected to extend its decline toward the December 4 low at $56.47 if it slides below $60.00. A further decline below $56.47 would expose the asset to the psychological support of $50.00.
Resistance: On the topside, the 20-day EMA at $68.09 is the first meaningful resistance, and a recovery above this cap would be needed to ease the current downside control. Until that barrier is reclaimed, momentum favors further softness, with traders likely to fade rebounds while RSI remains depressed.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Why do people invest in Silver?
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Which factors influence Silver prices?
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
How does industrial demand affect Silver prices?
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
How do Silver prices react to Gold’s moves?
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.