Silver (XAG/USD) retreated on Tuesday after failing to sustain its earlier gains, trading around $66 at the time of writing, following an intraday high near $67.19 [1]. The pullback is attributed to rising oil prices, which have heightened concerns that inflation could remain elevated and prompt central banks, particularly the Federal Reserve, to maintain higher borrowing costs [1]. Higher interest rates typically weigh on silver, as the metal does not offer yield [1].
Market expectations for tighter Federal Reserve policy have increased since Friday’s positive US employment report, with the CME FedWatch tool indicating about a 60% probability of a 25-basis-point rate hike next week [1]. Despite this, silver's downside appears limited as the US Dollar Index (DXY) remains under pressure, trading around 98.82 after briefly reclaiming 99, near its lowest level in over two weeks [1].
Investors are now focused on upcoming US Producer Price Index (PPI) data on Thursday and Consumer Price Index (CPI) data on Friday, which are expected to influence the Fed's decision at its September 15-16 meeting [1].
From a technical perspective, XAG/USD is holding above the 50-day simple moving average (SMA) at $62 and a Fibonacci support band between $60.97 (61.8% retracement) and $64.80 (38.2% retracement), suggesting that downside attempts are currently cushioned [1]. However, the price remains below the 100-day SMA at $67.28 and the 23.6% Fibonacci retracement at $67.17, keeping the broader tone neutral. The Relative Strength Index (RSI) is around 53, and the Moving Average Convergence Divergence (MACD) is slightly negative, indicating fading upside momentum [1].
Key resistance levels are at $67.17 (23.6% Fibonacci retracement) and the 100-day SMA at $67, with further hurdles at $71 and the 200-day SMA at $72. On the downside, immediate support is at $64.80, with further cushions at $62.89 (50% retracement) and $60.97 (61.8% retracement). A break below these levels could expose deeper support at $58.24 and $54.77, with the 50-day SMA at $62 underpinning the broader consolidation [1].
CONCLUSION
Silver's recent pullback reflects heightened expectations of a Federal Reserve rate hike amid persistent inflation concerns, though downside appears limited by technical support and a weaker US Dollar. Upcoming US inflation data will be critical in shaping the Fed's next move and, consequently, silver's near-term direction. Market participants remain cautious, awaiting further signals from economic releases.