Silver advances above $52 despite higher US yields and bets on a Fed rate hike

• Silver rises 1.60% on Wednesday even as US Treasury yields and the US Dollar climb.
• An upside surprise in US inflation strengthens expectations for additional Federal Reserve rate increases.
• Restrictive monetary policy could persist if inflation proves stubborn, Deutsche Bank and Commerzbank warn.

Hotter-than-expected inflation has bolstered expectations for further interest rate increases by the Federal Reserve (Fed), lifting US Treasury yields and the US Dollar (USD). Despite those headwinds, Silver (XAG/USD) is up 1.60% on Wednesday, trading at around $52.35 at the time of writing.

October's US Consumer Price Index (CPI) increased by 0.4%, surpassing the market forecast of 0.3% but easing from September's 0.6% rise. Excluding food and energy prices, core CPI climbed 0.3%, matching the previous month's reading and exceeding expectations of 0.2%.

With the figures adding to concerns that inflation remains persistent, investors are anticipating more forceful monetary tightening. Markets now fully price in a December rate increase by the Fed, according to the CME FedWatch tool. The implied probability of a 25-basis-point (bps) rise stands at 88%, against a 12% chance of a larger 50 bps increase.

The latest reading meets the threshold previously outlined by Fed Governor Christopher Waller, who indicated that a 50 bps increase could be needed if October core inflation came in at 0.3% or above. Following the inflation surprise, US government bonds sold off sharply on Tuesday, briefly driving the benchmark 10-year Treasury yield above 5%.

Three successive monthly increases of 0.3% have taken core inflation's three-month annualised rate to 3.75%, its quickest pace since April 2024, Deutsche Bank analysts note. In the bank's view, such persistence makes inflationary pressures increasingly hard to dismiss as temporary.

Commerzbank economists also caution that underlying inflation is still too high and has stopped falling. Against a backdrop of resilient economic activity and continuing geopolitical tensions in the Middle East, the German bank expects inflation to remain persistent throughout 2026, with any potential easing emerging only in 2027.

A 0.68% rise in the US Dollar Index (DXY) on Wednesday marks a second consecutive day of recovery. Although higher Treasury yields and a firmer dollar typically put pressure on non-yielding assets such as Silver, the metal's gains point to sustained buying interest. Expectations of additional Fed tightening could, however, restrain further advances.

Silver consolidates between key moving averages

At $52.31 on the one-hour chart, XAG/USD remains above its 200-period simple moving average (SMA) of $51.52 but below the 100-period SMA at $52.37. Consolidation between these key averages leaves the short-term outlook neutral to slightly soft. Just below its midpoint at 45.93, the Relative Strength Index (RSI) suggests bullish momentum has ebbed since the recent surge towards $53.00, with neither buyers nor sellers currently in clear control.

The 100-period SMA at $52.37 provides the first resistance on any advance. Beyond it, horizontal barriers at $53.20 and $53.72 stand in the way of the recent recovery highs. Initial support lies near $51.52 at the 200-period SMA, followed by the horizontal floor at $51.10. A sustained move below these levels would leave scope for a deeper correction; if they hold, XAG/USD would remain rangebound beneath the nearby moving-average ceiling.

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