XAG/USD Falls Further as Fed Pause Expectations Rise

Key Moments

Fed Outlook Weighs on Silver Prices

Silver prices (XAG/USD) are under pressure in late Asian trade on Monday, slipping 0.5% to trade near $80.00. During the session, the metal retested a three-week trough around $78.00 as investors positioned for the upcoming Federal Reserve policy decision on Wednesday.

Market participants expect the Fed to leave interest rates unchanged, with the CME FedWatch tool indicating strong confidence that the target range will remain at 3.50%-3.75%. If confirmed, this would mark the second consecutive meeting in which the central bank keeps borrowing costs steady, extending its pause after a period of monetary easing.

A prolonged pause in rate cuts generally reduces the appeal of non-yielding assets such as Silver, as investors can obtain returns from interest-bearing instruments instead.

Inflation Expectations and Geopolitics Shape Policy Views

The Fed is seen maintaining its current stance amid rising oil prices, which have contributed to a shift in consumer inflation expectations. The increase in crude prices has been linked to ongoing conflicts in the Middle East involving the United States (US), Iran, and Israel.

Higher gasoline prices in the US have already climbed significantly, adding strain to household budgets and complicating the inflation outlook. According to the CME FedWatch tool, policymakers are not expected to cut interest rates before the October policy meeting, underscoring the central bank’s cautious approach.

At the same time, escalating geopolitical risks associated with Iran’s conflicts are expected to provide a floor for Silver prices. As a traditional safe-haven asset, Silver tends to attract demand during periods of heightened uncertainty, which can temper downside moves even when monetary conditions are less supportive.

Technical Picture: Bias Remains Bearish

At the time of writing, XAG/USD is trading near $80.00, with the short-term technical backdrop skewed to the downside. The spot price is holding below the 20-day Exponential Moving Average (EMA), currently around $84.30, confirming a downside break from its recent consolidation range. The market has been forming a series of lower highs, repeatedly failing to regain the clustered moving average area that is now reinforcing the short-term downtrend.

The 14-day Relative Strength Index (RSI) is fluctuating within the 40.00-60.00 range, signaling a largely sideways momentum profile rather than an oversold or overbought condition.

Bears are seen maintaining the upper hand as long as prices trade beneath the $83.00 region and the declining 20-day EMA. A sustained move above the $82.00–$83.00 resistance band would be needed to challenge the current bearish structure and bring $85.00 into focus.

(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.