Silver Rebounds Above $60 as Softer Inflation Tempers Fed

Key Moments

Macro Drivers: Oil Weakness and Fed Expectations

Silver prices (XAG/USD) advanced during Asian trading on Friday, with the spot price hovering around $60.10 per troy ounce after three days of losses. The non-yielding metal found support as declining oil prices helped alleviate some inflation concerns and tempered expectations for imminent Federal Reserve rate increases.

Oil retreated after US President Donald Trump stated on social media that the United States was engaged in “productive discussions” with Iran and that it would not undertake military action against the country before the midterm elections. The softer oil backdrop contributed to a modest reassessment of near-term inflation risks.

According to the CME FedWatch Tool, markets were pricing in nearly a 17.7% probability that the Federal Reserve would raise interest rates by at least 25 basis points at its policy meeting later this month, down from 38% one week earlier. However, traders still saw an 83% chance of a rate hike at the Fed’s December meeting.

Fed Communication: Hawkish Tone Remains Dominant

Recent remarks from Federal Reserve officials continued to underline a bias toward tighter policy, even as market-implied odds for an immediate move moderated.

Fed’s Musalem delivered a firmly hawkish message, with a 7.3/10 FXS Speechtracker score essentially in line with the 7.2/10 historical average, underscoring continuity rather than escalation in tone. The emphasis that “more monetary policy firming will be required” to bring inflation back to 2% while the economy and job market are described as strong and balanced reinforces a narrative of additional rate hikes rather than cuts, supportive of the Dollar and yields. Musalem’s focus on persistent demand pressures, anchored market inflation expectations, and structurally higher real rates driven by strong capital demand and AI-related investment points to a higher-for-longer rate environment.

The FXS Fed Sentiment Index slipped by 0.25 points to 138.33, indicating a modest pullback in perceived hawkishness despite remaining deep in hawkish territory. With the index well above the neutral 100 threshold, the speech still signals a policy stance biased toward further tightening, even as the marginal decline suggests markets may have already priced in much of this hawkish guidance captured by the FXS Speechtracker.

Fed’s Waller delivered a distinctly hawkish message, with an 8/10 FXS Speechtracker score standing above the 7.2/10 historical average and reinforcing expectations for tighter policy. The emphasis that “more hikes [are] needed” while allowing that they need not come at consecutive meetings signals a preference for a higher terminal rate but with tactical flexibility, especially as Waller highlights persistent inflationary forces from AI investment and energy shocks alongside a strengthening economy and a solid labor market. Concern that inflation has been above target for nearly 5-1/2 years and could unanchor expectations underscores a bias toward further tightening, supportive of the Dollar and negative for risk-sensitive currencies.

Market Metrics Summary

Technical Picture: Bearish Bias Persists Below Key EMAs

On the daily chart, XAG/USD is quoted at $60.10, retaining a negative short-term tone as prices remain below both the shorter- and medium-term Exponential Moving Averages (EMAs). The nine-period and 50-period EMAs sit overhead, highlighting a layered zone of resistance that continues to limit upside attempts. A 14-day Relative Strength Index (RSI) reading around 40.7 points to prevailing downside pressure rather than a clearly oversold setup.

On the upside, initial resistance is identified at the nine-period EMA near $60.74. A more substantial technical barrier is located at the 50-period EMA around $63.39. A sustained move above this latter level would be required to mitigate the current bearish bias and pave the way for a more constructive recovery phase.

With the information available, no clear structural support levels are defined. As a result, any renewed decline from present levels could leave silver vulnerable to probing lower price areas in search of fresh buying interest.

Background: Silver as an Investment Asset

Silver is a widely traded precious metal among investors. It has historically served as both a store of value and a medium of exchange. While it is generally less prominent than Gold in many portfolios, market participants can turn to Silver for diversification, its intrinsic value, or as a potential hedge during periods of elevated inflation.

Exposure to Silver can be obtained in physical form, such as coins or bars, or through financial instruments like Exchange Traded Funds that track its performance on global markets.

Key Drivers of Silver Pricing

Silver prices are influenced by a broad set of factors. Episodes of geopolitical stress or fears of a deep economic downturn can push Silver higher as investors seek its perceived safe-haven qualities, though typically to a lesser extent than Gold. Because Silver does not provide yield, it tends to benefit from lower interest rates.

Given that Silver is quoted in US dollars (XAG/USD), currency dynamics also play an important role. A strong US Dollar often restrains Silver prices, while a softer Dollar can be supportive. Additional drivers include investment flows, mining output – with Silver being more plentiful than Gold – and recycling activity.

Industrial Demand and the Link to Gold

Silver is heavily used in industrial applications, particularly in electronics and solar-related sectors, supported by its very high electrical conductivity, which exceeds that of Copper and Gold. A pickup in industrial consumption can push prices higher, whereas weaker demand tends to weigh on the market. Economic developments in the United States, China, and India can exert a notable influence: the US and especially China rely on Silver in various industrial processes, while in India, jewelry demand is an important component of overall consumption.

Silver also tends to move in tandem with Gold. When Gold strengthens, Silver frequently follows because both are viewed as safe-haven assets. The Gold/Silver ratio – the number of ounces of Silver needed to equal one ounce of Gold – is sometimes used to gauge the relative pricing of the two metals. Some market participants interpret a high ratio as a sign that Silver may be undervalued, or Gold overvalued, whereas a low ratio can be read the other way around.