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Silver declines as US Dollar recovery, Fed stance weigh on prices

  • Silver loses 1.10% to $47.70, pressured by the recovery in the US Dollar and the Federal Reserve’s restrictive stance.
  • Risk aversion and geopolitical tensions continue to offer partial support to safe-haven demand.
  • The risk of a prolonged US government shutdown and divisions within the Fed fuel volatility in precious metals.

Silver (XAG/USD) declines on Tuesday to around $47.70 per ounce, down 1.10% on the day, after attempting to extend its recent rally beyond the $49.50 level. Selling pressure is increasing as the US Dollar (USD) edges higher, supported by expectations of a more restrictive monetary policy from the Federal Reserve (Fed).

The grey metal is struggling under the firmer tone recently adopted by several Fed officials, including Chair Jerome Powell, who stated that another rate cut in December “is not a given.” Markets are now pricing roughly a 65% chance of an interest rate reduction at the December meeting, according to the CME FedWatch tool. This cautious stance strengthens the US Dollar and caps gains for non-yielding assets such as Silver.

At the same time, the US economy remains hampered by the ongoing budget stalemate in Washington, as the partial government shutdown enters its sixth week. If it continues, it would become the longest in US history, potentially delaying the release of key indicators such as the Nonfarm Payrolls (NFP) report and adding to macroeconomic uncertainty.

Investors are also closely watching persistent geopolitical and trade tensions, which keep demand for safe-haven assets alive. This defensive component helps limit Silver’s correction, after recent gains fueled by expectations that the Fed could resume monetary easing if economic risks intensify.

Silver Technical Analysis: Faces resistance near $49.40 amid potential double-top setup

Silver price chart

Silver 4-hour chart. Source: FXStreet

Silver prices are retreating from the $49.40 resistance region, near the previous peak of October 23 at $49.46, forming a potential double-top pattern on the 4-hour chart. The rejection from this resistance zone could trigger a deeper bearish correction and expose the October 28 low at $45.56. A break below this level, which represents the neckline of the double-top formation, would open the door to a more pronounced decline, with a projected target around $41.80.

On the upside, a break above the $49.40 resistance would bring the 100-period Simple Moving Average (SMA) on the 4-hour chart, currently at $49.80, into focus. Further gains could see Silver testing the recent all-time high at $54.86.

The mildly downward-sloping 100-period SMA, combined with the Relative Strength Index (RSI) dropping below the 50 level, underscores mounting bearish momentum in the short term.

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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