Silver Price Forecast: XAG/USD rebounds to near $56.00 as oil prices, US Dollar decline
- Silver rises as falling crude oil prices, lower bond yields, and a weaker dollar eased broader market pressure.
- Hotter US CPI data boosted expectations for a potential Fed interest rate hike at the October FOMC meeting.
- September headline CPI reached 3.7% annually, while core CPI rose 2.6%, both exceeding market forecasts.
Silver price (XAG/USD) gains ground after three days of losses, trading around $56.00 per troy ounce during Asian hours on Thursday. Non-yielding Silver gained ground as crude oil prices declined and pressure across other markets eased. A softer US dollar and retreating bond yields provided additional support to precious metals, creating a more favorable environment for non-yielding assets.
However, a hotter-than-anticipated US inflation report soon tempered these gains. The data reinforced expectations for a potentially more hawkish Federal Reserve (Fed), bolstering arguments for an interest rate hike at the upcoming Federal Open Market Committee (FOMC) meeting on October 27–28. Following the release, futures traders raised the probability of a rate hike at the late-October meeting to approximately 31.6%, according to the CME Group’s FedWatch tool.
The economic pressure was detailed in a report released on Wednesday by the Bureau of Labor Statistics (BLS). The US Consumer Price Index (CPI), a broad measure of goods and services costs across the economy, climbed 0.6% month-over-month in September, pushing the 12-month headline rate to 3.7%. Both metrics came in higher than economists' forecasts of 0.6% and 3.6%, respectively. Meanwhile, core CPI, which strips out volatile food and energy components, advanced 0.3% for the month and rose 2.6% on an annual basis, exceeding market estimates of 0.2% and 2.5%.
Daly leans hawkish but urges patience as markets digest CPI
Fed’s Daly delivers a moderately more hawkish tone, with the FXS Speechtracker score at 6.8 versus a 6.1 historical average, signaling firmer conviction on the need for possible further tightening. The emphasis that gas-driven headline CPI is rising while core inflation remains stubborn, alongside remarks that more rate hikes are likely but timing should be deliberate, underscores a cautious hawkish stance that prioritizes clear communication and market stability over rapid action. The focus on persistent above-target inflation risks, a steady labor market, and the reassurance that markets have calmed after the CPI shock reinforces a message of patience within a still price-stability-focused framework.
The FXS Fed Sentiment Index slipped by 0.84 points to 128.17, indicating a modest pullback in perceived hawkishness even as the index remains firmly above the neutral 100 mark. This configuration suggests that, despite a slight softening in incremental tone, the overall policy backdrop remains hawkish, with the FXS Fed Sentiment Index and FXS Speechtracker both pointing to a Federal Reserve still biased toward further tightening if inflation shocks persist.
Technical Analysis:
In the daily chart, XAG/USD trades at $56.00, extending a bearish phase as it holds well below the nine‑ and 50-day Exponential Moving Averages (EMAs), which cap the upside and frame a deteriorating trend structure. The 14-day Relative Strength Index (RSI) at 32.36 hovers just above oversold territory, hinting at persistent selling pressure, while the FXS Fed Sentiment Index at 128.17 suggests still‑elevated policy uncertainty that may continue to weigh on silver in the near term.
On the topside, initial resistance is aligned with the short‑term EMA at $58.80, and a sustained break above this level would be needed to relieve immediate downside pressure. Beyond that, the 50‑day EMA at $62.61 represents a more significant barrier; as long as price trades beneath this cluster of moving averages, rallies are likely to be sold into, keeping the bearish bias intact in the coming sessions.
(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.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
