XAG/USD Drops to $65.50 as Hawkish Fed Rates Hit Metal

Key Moments

Fed Outlook Pressures Non-Yielding Silver

Silver prices (XAG/USD) are retracing after the prior session’s advance, with the metal changing hands around $66.50 per troy ounce during Asian trading on Wednesday. The pullback comes as investors react to a firmly hawkish stance from the Federal Reserve, which is reinforcing headwinds for assets that do not generate income.

The US central bank recently lifted its benchmark rate by 25 basis points, bringing the target band to 3.75%-4.00%. Policymakers also signaled that an additional increase is possible before year-end. Market participants are aligning with that guidance, with the CME FedWatch Tool indicating an 89.2% probability of another hike in December as traders await preliminary US PMI data due later on Wednesday.

Oil, Geopolitics and Potential Support for XAG/USD

Despite the rate backdrop, silver may find some support from developments in energy and geopolitics. After five consecutive sessions of declines, oil prices have begun to stabilize, easing concerns over broad-based inflation pressures that have been a major focus for markets.

Oil’s outlook is also being shaped by diplomatic signals between the United States and Iran. US Special Envoy to the Middle East, Steve Witkoff, said the United States conducted “lengthy” indirect talks with an Iranian delegation through intermediaries on the sidelines of the United Nations General Assembly (UNGA). According to Witkoff, mediators moved between the delegations throughout the day, completing a round of discussions that officials hope will be “constructive and promising.”

Further highlighting the shifting tone, US President Donald Trump said US officials had a very good meeting with Iranian representatives. Tehran, in turn, indicated it could reopen the Strait of Hormuz within seven days, contingent on a reduction in US military pressure and the lifting of the blockade on Iranian ports.