Silver slides as hawkish Fed lifts US Dollar and Treasury yields
- Silver trades modestly lower as the US Dollar strengthens after the Fed decision.
- The Fed raises rates by 25 basis points and signals that additional tightening is likely.
- Technically, XAG/USD maintains a bearish bias below the 100-day and 200-day SMAs, while the 50-day SMA acts as immediate support.
Silver (XAG/USD) trades under pressure on Wednesday as a stronger US Dollar and rising US Treasury yields weigh on the non-yielding metal following the Federal Reserve’s (Fed) monetary policy decision. At the time of writing, XAG/USD trades around $62.68, down 1.56% on the day.
The Fed raises the federal funds target range by 25 basis points to 3.75%-4.00% in a unanimous 12-0 decision. In its statement, the central bank says economic activity is expanding at a solid pace, domestic spending remains resilient and unemployment has changed little. Policymakers add that inflation remains elevated and that the rate increase will help bring inflation back to the 2% target sooner.
The US Dollar Index (DXY) advances above the psychological 100.00 mark, while the benchmark 10-year US Treasury yield rebounds toward 5.00%.
Higher interest rates and rising bond yields typically weigh on Silver by increasing the appeal of interest-bearing assets. However, the metal’s decline remains limited as the quarter-point hike was widely expected.
Fed Chairman Kevin Warsh also strikes a hawkish tone, saying inflation remains too high and that the economy is strong enough for policymakers to focus on price stability, while describing the labour side of the Fed’s mandate as “in good shape.”
Technical Analysis
In the daily chart, XAG/USD trades at $63.43. The near-term bias leans bearish as price holds above the 50-day simple moving average (SMA) at $62.76 but remains well below the 100-day and 200-day SMAs at $66.64 and $73.14, respectively, suggesting rallies are still capped by the broader downtrend. The Relative Strength Index (RSI) near 45 and a negative Moving Average Convergence Divergence (MACD) reading with red histogram bars hint at soft momentum and a lack of strong directional conviction, in line with a corrective bounce within a larger bearish context.
On the downside, initial support is seen near the 50-day SMA at $62.76, with further cushions at the psychological $60.00 level and then $55.00 if selling pressure accelerates. On the topside, a recovery toward the 100-day SMA at $66.64 would face notable resistance, while any extension beyond that level would bring the 200-day SMA at $73.14 into focus as a stronger medium-term barrier.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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