Silver Price Forecast: Sellers retain control within descending channel ahead of Fed

Ahead of the Fed’s monetary policy announcement, Silver continues to face selling pressure.
On the 4-hour chart, a descending channel continues to contain XAG/USD.
Below 50, RSI points to subdued buying momentum despite signs of stabilisation from a positive MACD.

Silver (XAG/USD) is down 0.57% on the day. Trading around $5410 at the time of writing, the metal is consolidating modest losses on Wednesday but remains above Tuesday’s fresh year-to-date low of $52.67. Traders are avoiding aggressive positions before the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT. A slight decline in the US Dollar (USD) is cushioning Silver’s downside.

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After touching a fresh two-week high of 102.49 earlier in the day, the US Dollar Index (DXY) is broadly flat at around 102.33. The index measures the Greenback against a basket of six major currencies.

With interest rates widely expected to stay at 3.75%-4.00% following September’s 25-basis-point increase, the Fed’s policy outlook, rather than the decision itself, will be pivotal for the metal’s next move. Higher energy costs associated with Middle East tensions are partly responsible for inflation risks remaining skewed to the upside. Policymakers, however, retain their commitment to returning inflation to the 2% target.

Any indication of additional rate increases could therefore bolster the US Dollar and maintain pressure on Silver. As rates rise, so does the opportunity cost of holding the non-yielding metal; Dollar strength also raises its cost for overseas buyers. Conversely, a less hawkish message could weaken the Greenback and allow Silver to recover.

4-Hour Technical Outlook

Below its 50-period, 100-period and 200-period Simple Moving Averages (SMAs), XAG/USD continues to trade inside a descending channel on the 4-hour chart. This leaves the near-term bias bearish, notwithstanding a modest improvement in MACD.

Although Moving Average Convergence Divergence (MACD) has moved into positive territory, the Relative Strength Index (RSI), at around 44, remains below its midpoint. Buying pressure thus appears muted, with the indicators suggesting consolidation within a bearish backdrop rather than a lasting reversal.

The horizontal barrier near $55.00 provides the first upside resistance, ahead of the 50-period SMA at $55.58. Only a decisive move above both would relieve immediate downward pressure and bring the 100-period SMA at $57.41 into focus. Further out, resistance is provided by the descending channel’s upper boundary near $60 and the 200-period SMA around $60.34.

Near the channel’s lower boundary, the $52.00-$52.50 area offers initial support. Should this zone give way, losses could extend towards horizontal support at $50.00.

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

Silver: Key Questions

What attracts investors to Silver?

Historically a store of value and a means of exchange, Silver remains an actively traded precious metal among investors. It attracts less interest than Gold, but traders may choose it for portfolio diversification, its intrinsic value or its potential to hedge against periods of high inflation. Investment options include physical Silver coins and bars, as well as instruments such as Exchange Traded Funds that track its international market price.

What drives movements in Silver prices?

A broad set of influences can shift Silver prices. Its safe-haven appeal can push prices higher during geopolitical instability or fears of a severe recession, though this effect is weaker than for Gold. Lower interest rates generally support Silver because it pays no yield. With prices quoted in US dollars (XAG/USD), the performance of the US Dollar (USD) also matters: Dollar strength tends to restrain Silver, while a weaker currency is likely to lift prices. Investment demand, recycling rates and mining supply also play a role, with Silver far more abundant than Gold.

What role does industrial demand play in Silver pricing?

With electrical conductivity among the highest of any metal, exceeding that of Copper and Gold, Silver has extensive industrial applications, notably in electronics and solar energy. Rising demand can lift prices, whereas falling demand generally depresses them. Economic developments in the US, China and India can also drive price fluctuations. Large industrial sectors in the US and, especially, China consume Silver across a range of processes. In India, consumer demand for Silver jewellery is another important influence on prices.

How closely does Silver track Gold prices?

Given their similar safe-haven status, Silver generally tracks Gold and typically rises when Gold advances. Relative valuations can be assessed using the Gold/Silver ratio, which measures how many ounces of Silver match the value of one ounce of Gold. A high reading may, in some investors’ view, signal undervalued Silver or overvalued Gold. A low reading, by contrast, could indicate that Gold is undervalued compared with Silver.