Silver Extends Losses as Hawkish Fed Pressures XAG/USD

Key Moments

Macro Drivers Pressure Silver

Silver prices (XAG/USD) recorded a new low of more than six months at $60.74 in Asian trading on Wednesday, with the metal continuing to face selling interest. Market participants appear increasingly convinced that the Federal Reserve will implement at least two interest rate hikes this year.

Data from the CME FedWatch tool indicates that the probability of a Fed rate increase this year stands near 86%. This represents a notable reversal from earlier expectations for two rate cuts before the Middle East conflict, an event that preceded a marked pickup in inflation pressures.

In theory, a higher interest rate environment is typically unfavorable for non-yielding assets such as Silver, as it raises the opportunity cost of holding them.

Stronger Dollar Adds to Headwinds

A firmer US Dollar is compounding the downward pressure on Silver. The US Dollar Index (DXY) – which tracks the performance of the Greenback against a basket of six major currencies – is trading 0.1% higher near 101.50 at press time, described as the strongest level in more than a year. A rising Dollar tends to undermine demand for dollar-denominated commodities, making Silver less attractive from a risk-reward perspective.

Focus on Upcoming US PCE Inflation Data

Investors are now looking to the next key data point for insight into the US monetary policy outlook. The United States Personal Consumption Expenditure Price Index (PCE) for May is scheduled for release on Thursday. Core PCE inflation, the Fed’s preferred gauge, is anticipated to come in at 3.4% year-on-year, compared with 3.3% in April.

Technical Overview for XAG/USD

Bias: XAG/USD is trading lower around $61.00, maintaining a negative short-term stance as prices remain significantly beneath the 20-day Exponential Moving Average (EMA) at $68.09.

Momentum: The metal continues to retreat from recent peaks, with the 14-period Relative Strength Index (RSI) at 31.92, hovering just above oversold conditions. This points to ongoing downward pressure even as the decline appears increasingly extended.

Support: If XAG/USD falls below $60.00, selling could extend toward the December 4 low at $56.47. A break under $56.47 would bring the psychologically important $50.00 level into view.

Resistance: On the upside, the 20-day EMA at $68.09 is the first notable resistance area. A sustained move back above this level would be required to ease the current bearish grip. Until that threshold is overcome, price action is likely to remain soft, with rallies viewed as potential selling opportunities while the RSI stays depressed.