Silver Price Forecast: XAG/USD drops 8% as hawkish Fed expectations pressure metals

Silver (XAG/USD) plunges on Friday, erasing all gains recorded earlier this week as hawkish Federal Reserve (Fed) expectations push US Treasury yields and the US Dollar (USD) higher. At the time of writing, XAG/USD is trading around $76.65, down nearly 8% on the day and hovering near its lowest level in over a week.

The sharp decline comes as the latest US economic data, including stronger-than-expected inflation and resilient consumer spending, strengthened expectations that the Fed could raise interest rates later this year as higher Oil prices linked to ongoing Middle East disruptions continue to fuel inflationary pressures.

According to the CME FedWatch Tool, traders now expect the US central bank to keep interest rates unchanged in the coming months, while pricing in a roughly 42% probability of a rate hike at the December meeting.

Against this backdrop, Silver is expected to maintain a bearish near-term bias as a higher interest rate environment reduces the appeal of non-yielding assets like Silver, while technical indicators suggest bears remain in control.

Technical Analysis:

In the daily chart, XAG/USD retains a capped tone as price holds beneath both the 50-day Simple Moving Average (SMA) at $76.99 and the 100-day SMA at $81.28. The 200-day SMA at $65.04 remains well below the market, suggesting the broader trend is still constructive, but the current pullback is pressuring the short- and medium-term structure.

The Relative Strength Index (14) at 47.37 hovers just below the neutral line, while the Moving Average Convergence Divergence (MACD) indicator stays in positive territory around 0.66 but has eased from recent highs, hinting that bullish momentum is waning rather than strengthening.

On the topside, immediate resistance is located at the 50-day SMA at $76.99, where a sustained break would be needed to alleviate near-term downside pressure, with the next bullish hurdle emerging at the 100-day SMA at $81.28.

On the downside, the main structural support is much lower at the 200-day SMA near $65.04, leaving the metal vulnerable to further corrective slippage if sellers maintain control below the overhanging cluster of shorter-term moving averages.

(The technical analysis of this story was written with the help of an AI tool.)