Silver (XAG/USD) experienced a sharp decline on Friday, dropping nearly 8% to trade around $76.65 and erasing all gains recorded earlier in the week [1]. This plunge brought the metal to its lowest level in over a week, driven by heightened expectations of a hawkish Federal Reserve stance [1]. The latest US economic data, including stronger-than-expected inflation and resilient consumer spending, reinforced the view that the Fed could raise interest rates later this year [1]. Additionally, higher oil prices linked to ongoing Middle East disruptions have continued to fuel inflationary pressures, further supporting the case for tighter monetary policy [1].
According to the CME FedWatch Tool, traders now anticipate the US central bank will keep interest rates unchanged in the coming months, but there is a roughly 42% probability of a rate hike at the December meeting [1]. In this environment, silver is expected to maintain a bearish near-term bias, as higher interest rates reduce the appeal of non-yielding assets like silver [1]. Technical analysis shows XAG/USD trading below both the 50-day Simple Moving Average (SMA) at $76.99 and the 100-day SMA at $81.28, indicating that bears remain in control of the short- and medium-term structure [1]. The Relative Strength Index (14) stands at 47.37, just below the neutral line, while the MACD indicator remains positive but has eased from recent highs, suggesting waning bullish momentum [1].
Immediate resistance is identified at the 50-day SMA ($76.99), with the next bullish hurdle at the 100-day SMA ($81.28) [1]. On the downside, the main structural support is much lower at the 200-day SMA near $65.04, leaving silver vulnerable to further corrective slippage if sellers maintain control [1].
Overall, the combination of hawkish Fed expectations, strong US economic data, and technical weakness has led to a significant sell-off in silver, with market participants closely watching upcoming Fed decisions and inflation data for further direction [1].
CONCLUSION
Silver's 8% plunge reflects heightened market anxiety over potential Fed rate hikes and persistent inflationary pressures. With technical indicators signaling further downside risk, the market remains cautious, awaiting clearer signals from the Federal Reserve and upcoming economic data.