Silver Price Forecast: XAG/USD jumps to near $65 ahead of Fed’s interest rate decision

Silver price surges to near $64.80, reflecting strength ahead of Fed’s monetary policy outcome.
The Fed is expected to deliver at least two interest rate hikes this year.
Investors keenly await Fed’s monetary policy statement and Chairman Warsh’s press conference.

Sagar Dua FXStreet

Silver price (XAG/USD) is up 1.8% to near $64.80 during the European trading session on Wednesday. The white metal trades firmly ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

The CME FedWatch tool shows traders are increasingly confident that the Fed will hike interest rates by 25 basis points (bps) to 3.75%-4.00%. Firm Fed’s interest rate hike expectations are backed by sticky United States (US) Consumer Price Index (CPI) report for August released last week.

Therefore, the market reaction would hinge upon the monetary policy statement and commentary from Fed Chair Kevin Warsh at the press conference regarding inflation and the economic outlook. Warsh is unlikely to provide so-called forward-guidance on interest rates, as he clarified in its first meeting that it isn’t appropriate under current circumstances.

The CME tool also shows an almost 79% chance that the Fed will deliver at least two interest rate hikes by the year-end.

The scenario of interest rate hikes by the Fed bodes well for US Treasury Yields, which diminishes the appeal of non-yielding assets, such as Silver.

At press time, 10-year US Treasury Yields are marginally lower at around 5%, but are close to their 19-year high at around 5.04% posted on Tuesday.

Silver Technical Analysis

In the daily chart, XAG/USD trades at $64.80, maintaining a mildly bearish near-term bias as it holds below the 20-day Exponential Moving Average (EMA) at $65.12. The metal has recently slipped back under this short-term average after failing to sustain gains above a downward resistance trend line, while the Relative Strength Index (RSI) around 49 hints at fading momentum and a lack of decisive buying pressure.

On the topside, the 20-day EMA at $65.12 forms initial resistance; a daily close above this level would be needed to ease the current downside pressure and reopen the path toward the broken descending trend line. On the downside, price action remains guided by an underlying upward support trend line stemming from the low near $62, with a clear break below that rising structure likely to expose deeper losses toward the lower $60 area.

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

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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