Silver Drops Toward 11-Month Low as Oil, Rates Drag

Key Moments

Macro Drivers Temper Pressure on Silver

Silver prices (XAG/USD) are under pressure after a modest uptick in the prior session, with the metal trading near $53.80 per troy ounce during Asian trading on Tuesday. The non-yielding asset is hovering close to an 11-month trough of $53.01, reached on Monday, as persistent concerns about inflation linked to earlier elevated energy prices keep expectations for tighter monetary policy in place.

That said, the downside in silver could begin to moderate. The combination of softer crude oil prices and bargain-hunting interest ahead of the upcoming Federal Reserve policy decision is providing some support, potentially slowing the recent decline in the white metal.

Regional Diplomacy Weighs on Oil and Inflation Concerns

Crude oil prices have retreated amid renewed diplomatic efforts aimed at easing tensions between the United States and Iran. This shift has contributed to a cooling of short-term inflation fears.

Following high-level talks in Tehran, Iran, Saudi Arabia, Pakistan, and Turkey agreed on Monday to continue security discussions and deepen regional cooperation, according to Islamic Republic of Iran Broadcasting (IRIB). A joint statement issued after the initial meeting between Iran and senior representatives from the Mecca Joint Defence Agreement stated that all four nations committed to ongoing dialogue and consultations focused on “regional peace, security, and stability.”

Central Bank Expectations Shape Market Sentiment

In the policy arena, market participants broadly anticipate that the Federal Reserve will leave interest rates unchanged at its October meeting, while still leaving the door open to another hike later in the year. Data from the CME FedWatch Tool shows that investors assign an 89.5% probability to a pause in October and an 82.3% likelihood of a rate increase in December.

Elsewhere, the European Central Bank (ECB) and the Bank of Japan (BoJ) are also expected to keep their benchmark rates steady. In contrast, the Bank of Canada (BoC) is anticipated to raise its policy rate by 25 basis points this week.

Technical Picture: Bearish Bias with Oversold Signals Emerging

On the daily chart, XAG/USD changes hands around $53.80, retaining a bearish short-term tone as prices stay below both the nine-day and 50-day Exponential Moving Averages (EMAs). The current EMA configuration points to likely selling pressure on any rebounds, with the averages acting as overhead resistance.

The 14-day Relative Strength Index (RSI) stands at 31.06, close to oversold conditions. This suggests that while downside momentum remains intact, it is becoming stretched. The FXS Fed Sentiment Index holding near 127.51 underscores a cautious environment for silver, reflecting persistently tight monetary expectations.

On the upside, initial resistance appears at the nine-day EMA near $55.74. A more substantial hurdle is seen at the 50-day EMA around $60.74; a clear break of this level would be needed to meaningfully ease the prevailing bearish structure. The current dataset does not highlight any well-defined support zones below present pricing, leaving silver exposed to additional weakness until buyers can reclaim the short-term EMA band, which would be the first indication of stabilization on the daily timeframe.

Technical Reference Levels for XAG/USD