Silver drops as Federal Reserve unlikely to cut rates

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Silver drops 2.48% to $75.79 today

Highlights

Rising Middle East tensions and elevated oil prices are stoking global inflation, reducing the odds of near-term Federal Reserve rate cuts.
Central banks' tighter monetary stance and a strong US dollar are capping silver's upside, despite recent geopolitical uncertainty.
Silver price action is volatile with mostly mixed technical signals, consolidating between $74 and $78 for the coming week.

Fed rate expectations constrain silver despite geopolitical tensions

On Wednesday, the US extended its ceasefire with Iran, leading to a recovery in silver prices alongside heightened geopolitical tensions in the Middle East. The resurgence of hostilities and ongoing uncertainty surrounding the US-Iran conflict has resulted in a steep rise in crude oil prices, increasing global inflation expectations and weakening the likelihood of imminent interest rate cuts by the US Federal Reserve. Elevated inflation and higher energy costs have prompted global central banks to maintain tighter monetary policy, generating downward pressure on non-yielding assets such as silver. A stronger US dollar, influenced by the expectation that the Fed will not reduce rates this year, has further limited silver’s upward momentum.

Mixed momentum as volatility tests support near technical boundaries

The current price is just below the MA-20 at $76.13 and MA-50 at $76.62, while staying well above the MA-200 at $70.10. The Ichimoku Kijun level stands at $75.04 and acts as immediate support. Momentum indicators are mixed: MACD on the daily shows a buy, but ADX gives a sell, and D1 BBP reveals overbought conditions, while RSI and Stoch RSI are moderately bullish to neutral, and CCI shows a neutral stance. The price is close to today’s low after a modest gap down, highlighting persistent volatility and continued selling pressure despite mixed signals from oscillators and trend indicators.

Sideways outlook driven by volatility and resistance levels

Heading into the next week, XAG is likely to oscillate within a volatility band between $74 and $78. The base case sees a period of sideways consolidation around current levels. A bullish breakout past $78 could accelerate gains if upward momentum returns, whereas a drop below $74 would expose the price to further weakness even as longer-term support persists.

Anton Kharitonov, expert at Traders Union, sees silver under short-term pressure as global inflation expectations rise and policymakers hold firm on tighter monetary policy. He believes the technical outlook remains mixed, with price trapped beneath key moving averages but longer-term support still intact. Kharitonov is cautious and expects consolidation between $74 and $78 in the near term. "Until silver can break decisively above $78, I remain defensive and see little reason to chase the upside here."

Earlier, analysts noted that while silver maintained an overall bullish bias, mixed technical signals and rising geopolitical risk called for a cautious approach. With the latest shifts in monetary policy expectations and persistent volatility, traders should closely monitor the $74 support level, as a sustained decline below this threshold could amplify downside momentum despite long-term support remaining intact.

Source of Data: XAG Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

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