Silver price rebounds ahead of expected Fed rate hike, Warsh press conference

Silver (XAG/USD) rebounds on Wednesday and trades around $64.00 per troy ounce at the time of writing, up 1.32% on the day. The grey metal recovers some of its recent losses as investors adjust positions ahead of the highly anticipated Federal Reserve (Fed) monetary policy decision, scheduled for 18:00 GMT.

Markets widely expect a 25-basis-point (bps) interest rate hike, which would bring the federal funds target range to 3.75%-4.00%. Such a move would mark the first interest rate increase by the US central bank since July 2023.

Expectations of tighter monetary policy have strengthened amid persistent inflationary pressures in the United States (US), partly fueled by the energy price shock stemming from the conflict in the Middle East. At the same time, the resilience of the US economy gives the Fed more room to tackle inflation. US Retail Sales rose 1.2% MoM in August, exceeding expectations for a 0.8% increase and rebounding from a 0.5% contraction in July.

With an interest rate hike already largely priced in, Silver’s reaction is likely to depend primarily on the message accompanying the decision. Investors will closely monitor the monetary policy statement, the Fed’s updated economic projections and Fed Chairman Kevin Warsh’s press conference, scheduled for 18:30 GMT.

Markets will be particularly focused on whether policymakers signal that the tightening cycle could continue. According to the CME FedWatch Tool, investors see a nearly 79% probability that the Fed will deliver at least two interest rate hikes by the end of the year.

The prospect of interest rates remaining higher for longer represents a headwind for Silver, which does not offer any yield. Higher interest rates tend to support US government bond yields, increasing the opportunity cost of holding precious metals. The benchmark 10-year US Treasury yield trades around 5.00% after reaching 5.04% on Tuesday, its highest level since 2007.

The US Dollar (USD) also remains firm ahead of the Fed decision, potentially limiting Silver’s upside. A stronger US Dollar generally makes USD-denominated metals more expensive for investors holding other currencies.

Against this backdrop, Silver’s direction could depend less on the widely expected rate hike itself than on the Fed’s guidance regarding the path ahead. A message pointing to further interest rate increases could support US Treasury yields and the US Dollar, putting pressure on the grey metal. Conversely, a lack of clear commitment to additional tightening could allow Silver to extend its rebound.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $64.46. The pair holds above the 100-hour Simple Moving Average (SMA) at $63.88 while still trading below the 200-hour SMA at $65.18, keeping a neutral to slightly constructive intraday tone as price consolidates between these trend filters. The Relative Strength Index (14) near 57 hints at mildly positive momentum, suggesting buyers retain a modest edge as long as the metal stays supported above nearby underlying levels.

On the downside, initial support emerges at $64.30, ahead of a lower horizontal floor at $63.95 and the 100-hour SMA clustered just below at $63.88, where dip-buying interest could reappear. On the topside, immediate resistance aligns at $64.95, with the 200-hour SMA at $65.18 and a higher horizontal barrier at $65.40 forming a dense supply zone that XAG/USD must clear to extend any recovery toward higher levels.

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