Silver Price Forecast: Why have higher oil prices pushed XAG/USD down to near $54.00?

• Silver comes under pressure as an oil-led rise in inflation concerns strengthens expectations of additional Fed rate hikes.
• Geopolitical uncertainty persists amid Israel's electoral stalemate, even as support for Netanyahu appears to be fading.
• While markets anticipate an October Fed rate pause, they assign an 84.4% probability to tightening in December.

Silver (XAG/USD) is giving up the previous day's modest gains, with prices hovering near $54.10 per troy ounce in Wednesday's Asian session. The pullback comes as traders look ahead to the US Federal Reserve’s policy announcement later in the day.

Fresh selling pressure is weighing on non-yielding Silver, as costlier crude oil revives inflation concerns and reinforces expectations of additional interest rate increases. Crude advanced while traders tracked Israel's election results, which could substantially reshape the country's politics and the course of the Middle East conflict.

With vote counting still under way, neither political bloc appears to command a clear majority. Exit polls point to a close contest, placing Prime Minister Benjamin Netanyahu level with opposition leader Gadi Eisenkot. The early outcome nevertheless suggests declining backing for Netanyahu, a long-standing dominant figure in Israeli politics who has led the country through nearly three years of conflict.

Expectations of unchanged US interest rates are also keeping financial markets focused on the Federal Reserve. At Wednesday's policy announcement, the central bank is widely anticipated to retain its benchmark rate within the 3.75% to 4.0% range. According to the CME FedWatch Tool, markets assign a 92.8% probability to a pause at the October meeting. With a December rate increase priced at an 84.4% probability, investors will closely examine Fed Chair Kevin Warsh's forthcoming press conference for signals on the policy path.

Energy trading has become quieter despite the recent sharp fluctuations in precious metals, according to strategists at Scotiabank. They describe crude prices as having "settled into tight consolidation ranges." With WTI trading "steady just above $100/bbl" and Brent holding "above $115/bbl," they highlight the relative stability of the benchmark crude contracts.

Continued scope for Fed tightening should support the US currency, in the view of strategists at Societe Generale. Their assessment is that “if the FOMC message (whatever that looks like in the brave new world) keeps December hike expectations alive, our bias is to remain dollar-positive,” while they also caution that, “unless the ECB is very hawkish, European economic fundamentals will weigh.”