Silver Price Forecast: XAG/USD faces downside risk near $54 as attention turns to Fed policy

• At around $54, Silver trades cautiously as markets await Wednesday’s Fed policy announcement.
• Interest rates are expected to remain in the 3.75%-4.00% range when the Fed announces its decision.
• Persistently high oil prices weigh on Silver.

Friday’s fresh year-to-date (YTD) low of $53 remains close as Silver (XAG/USD) trades cautiously during Monday’s European session. High oil prices are weighing on the white metal by fuelling concerns that the Federal Reserve (Fed) will retain its hawkish monetary policy stance for longer.

Brent climbs as Middle East tensions fuel inflation concerns before Fed meeting

Ahead of the Fed’s meeting, Commerzbank analysts highlight the link between regional tensions and renewed inflation concerns, noting that “escalating Middle East tensions pushed oil prices higher and revived inflation concerns ahead of Wednesday’s Fed meeting,” with “Brent the standout mover, rising 6.2% last week to just under USD117.” Their assessment that “the Middle East remains the principal geopolitical risk,” underlines how instability in the region is increasingly shaping the inflation debate as policymakers prepare to meet.

Wednesday’s monetary policy announcement will be scrutinised for fresh indications of the Fed’s outlook, with markets widely expecting interest rates to stay within the 3.75%-4.00% range. Particular attention will fall on the policy statement and Fed Chairman Kevin Warsh’s press conference.

Since returning to the Fed, Chair Warsh has shown little interest in offering guidance on the monetary policy outlook through his remarks. He has, however, repeatedly indicated that inflationary pressures remain very high.

Silver Remains Bearish on the Technical Chart

Trading at $53.84 on the daily chart, XAG/USD retains a bearish near-term outlook, with the price well beneath its 20-day Exponential Moving Average (EMA) of $58.27. The gap between the spot price and the EMA points to overhead supply continuing to limit rallies. Meanwhile, the Relative Strength Index (14), near 31, suggests oversold conditions are beginning to emerge, which could temper further declines rather than produce an outright reversal.

Initial resistance lies at $57.77, the July 17 low, ahead of the 20-day EMA at $58.27. A break beneath the YTD low of $53.03, meanwhile, could mark the start of another downward leg in Silver.

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