Silver Rebounds as Easing Oil Prices Temper Fed Hikes

Key Moments

Macro Drivers Support Silver

Silver price (XAG/USD) moves higher after declining in the previous session, changing hands around $63.80 per troy ounce during Asian trading on Thursday. The metal gains traction as easing oil prices reduce immediate inflation worries, offering a supportive backdrop for non-yielding precious metals.

The pullback in crude prices comes after reports that Saudi Arabia intends to bring roughly half of its East-West pipeline capacity back online within days, with full restoration targeted within six weeks. The pipeline, which serves as an alternative export corridor that avoids the Strait of Hormuz, was damaged in drone attacks last week. While repairs proceed, Saudi Arabia has increased efforts to move more crude through the strait, supported by the US military.

Federal Reserve Policy Poses a Constraint

Despite the latest bounce, silver continues to contend with a less favorable monetary policy backdrop. The US Federal Reserve has raised interest rates and indicated that another increase could follow before year-end. Policymakers lifted the federal funds rate by 25 basis points to a target band of 3.75% to 4.00%, in line with expectations. This marks the first rate hike in three years and increases the opportunity cost of holding assets such as silver that do not generate yield.

Fed Chair Kevin Warsh said that the move was because “inflation is too high and has been for too long”, adding that it was a “sober” and “responsible decision.” Warsh signaled the rate could be increased further in a bid to slow rising prices. Money markets priced in about a 49.8% chance of a Fed hike in October, according to the CME FedWatch tool.

Technical Picture for XAG/USD

On the daily chart, XAG/USD trades at $63.80 with a generally bearish short-term tone, as prices remain below both the nine- and 50-period Exponential Moving Averages (EMAs). The position of these EMAs above spot suggests that recent recovery attempts have been constrained, while the 14-day Relative Strength Index (RSI) easing to 47.3 indicates a consolidative to mildly soft setup rather than an outright oversold market.

On the upside, first resistance appears at the nine-period EMA near $64.36, followed by the 50-period EMA at $64.70. A decisive move above these layers would be required to reestablish a more robust bullish structure. On the downside, momentum support is associated with the RSI area around 47. A further decline in price accompanied by a drop in RSI toward 40 would likely point to strengthening bearish momentum in silver.