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Silver price falls as Fed tightening bets, US-Iran talks curb safe-haven demand

  • Silver falls 2.80% on Wednesday and retreats further from the $68.00 area.
  • The US Dollar remains supported by expectations of further interest rate hikes from the Fed.
  • US-Iran negotiations partially reduce demand for safe-haven assets.

Silver (XAG/USD) extends its decline on Wednesday, trading around $65.20 at the time of writing, down 2.80% on the day. The white metal retreats further from the $68.00 area as a stronger US Dollar (USD) and a hawkish repricing of the US interest rate outlook weigh on precious metals.

The Federal Reserve (Fed) remains the main headwind for Silver. The US central bank raised its benchmark interest rate by 25 basis points at its September meeting, bringing the target range to 3.75%-4%, and signaled that another rate hike could come before the end of the year.

Several Fed officials have also maintained a hawkish tone. St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee have supported the possibility of further monetary tightening amid persistent inflation risks. Boston Fed President Susan Collins and Richmond Fed President Tom Barkin have also left the door open to additional rate hikes.

Markets are now pricing in a nearly 90% chance of another rate hike in December, according to the CME FedWatch tool. The prospect of US interest rates remaining higher for longer supports the Greenback and increases the opportunity cost of holding non-yielding assets such as Silver.

Investors now await the release of preliminary US Purchasing Managers Index (PMI) data on Wednesday. Figures pointing to resilient economic activity could reinforce the Fed's hawkish outlook and provide additional support to the US Dollar.

Meanwhile, geopolitical developments in the Middle East are providing less support to precious metals. On the sidelines of the United Nations General Assembly (UNGA), US Special Envoy Steve Witkoff reported lengthy indirect discussions between the United States (US) and Iran, while US President Donald Trump described talks with Iranian representatives as very productive.

Tehran, for its part, indicated that it could reopen the Strait of Hormuz under certain conditions, including an easing of US military pressure and the blockade of Iranian ports. Signs of diplomatic progress are helping reduce some of the geopolitical risk premium that had previously supported demand for safe-haven assets.

Tensions, however, remain far from fully resolved as negotiations between Washington and Tehran continue and new US sanctions targeting Iranian aviation come into force on Wednesday. Diplomatic meetings surrounding the United Nations General Assembly therefore remain closely watched by markets.

XAG/USD technical analysis

Chart Analysis XAG/USD

In the one-hour chart, XAG/USD trades at $65.22, maintaining a mildly bearish near-term bias as it holds below the 100-period simple moving average (SMA) at $66.01 and the nearby horizontal barrier at $65.80. The 200-period SMA at $64.88 sits beneath the price and offers underlying trend support, but the metal appears capped by the overhead averages. The Relative Strength Index (14) around 34 suggests momentum is leaning toward the downside, reinforcing the risk of further corrective pressure while the price remains constrained under the 100-period SMA.

On the topside, initial resistance is seen at $65.80, followed by the 100-period SMA at $66.01, with higher hurdles at $67.55 and $68.30, where prior horizontal levels could attract renewed selling. On the downside, immediate support emerges at $65.07, ahead of the 200-period SMA at $64.88 and the lower horizontal floor near $64.56, where buyers may attempt to stabilize the decline if bearish sentiment extends.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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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