Silver (XAG/USD) slid more than 4% on Tuesday, trading around $61.96 and nearing three-month lows, as the US Dollar climbed to near one-year highs following the Federal Reserve's hawkish tilt at last week's monetary policy meeting, which reinforced expectations that interest rates will remain higher for longer [1]. Silver futures tumbled over 5% to $61.80 an ounce before paring some losses to settle around $62.25 [2]. The US Dollar Index (DXY) hovered around 101.24, its highest level since May 2025 [1]. The correction in silver follows an extraordinary rally last year, with the metal down nearly 50% from its all-time high near $121 reached in late January [1]. Price action has been largely confined to a broad $60-$90 range in recent months, with multiple rebounds from just above the $60 psychological level suggesting buyers are attempting to defend this zone [1]. However, a stronger US Dollar and rising Treasury yields are threatening that support, as markets price in the possibility of a Fed rate hike later this year [1].
The broader market saw a global sell-off in tech stocks, stoked by fears of higher interest rates, which spilled over into precious metals [2]. An unexpectedly hawkish Fed meeting chaired by Kevin Warsh last week boosted expectations for a year-end interest rate hike, further pressuring gold and silver prices, as the prospect of higher interest rates tends to weigh on non-yielding assets [2]. Technical analysis shows XAG/USD extending a bearish tone, holding well beneath the 50-, 100-, and 200-day Simple Moving Averages (SMAs), with momentum remaining weak and the Relative Strength Index (RSI) near the oversold band around 33 [1]. The next key support for silver is the horizontal floor at $60.00, where a break could open the way to further losses, while holding above it would signal consolidation within the broader bearish structure [1].
Wall Street sentiment has shifted, with several banks downgrading their price forecasts for gold following Warsh's first Fed meeting [2]. Bank of America's previous $6,000 target for an ounce of gold now looks unlikely, as the inflation backdrop remains "uncomfortable," likely driving tighter monetary policy, according to commodity strategist Michael Widmer [2]. Deutsche Bank revised its gold price target to $4,300 an ounce in Q3 if the Fed stays on hold, but outlined the risk that three to four Fed hikes could take gold as low as $3,800 an ounce [2].
Looking ahead, US Personal Consumption Expenditures (PCE) inflation data due on Thursday could act as the next catalyst for silver. A stronger-than-expected reading would likely boost the US Dollar further and strengthen bets on Fed rate hikes, leaving silver vulnerable to an extension of its downtrend. Conversely, a softer reading could pause the Greenback's advance and trigger a short-term recovery in XAG/USD [1].
CONCLUSION
Silver prices have come under significant pressure due to a stronger US Dollar and heightened expectations for Fed rate hikes, with technical and analyst commentary pointing to continued vulnerability. The $60 support level remains crucial for silver, while upcoming US inflation data could determine the next move. Market sentiment is bearish, and the impact is high as both precious metals and broader markets react to shifting monetary policy expectations.