Silver (XAG/USD) traded nearly flat on Tuesday, holding around $60.80, its lowest level in almost two months, and remained unable to break above $61.00. The metal is on track for an 8.5% monthly decline in September, reflecting significant weakness in precious metals amid a surging US Dollar and rising long-term yields, which have reached multi-decade highs [1]. The US Dollar Index is trading at 101.37 after reaching a one-year high of 101.49, with a nearly 2% rally in September attributed to market expectations of at least one more Federal Reserve rate hike in Q4 [1].
Analyst John Velis from BNY Markets noted that the rise in yields is driven by market confidence in central bank credibility, with expectations that the Fed and other central banks will respond forcefully to any renewed inflation pressures. This has pushed real yields higher, even as long-term inflation expectations remain contained, exerting downward pressure on precious metals like silver [1].
From a technical perspective, XAG/USD broke below the neckline of a bearish Head & Shoulders pattern at the $62.20 area. Momentum indicators reinforce the bearish outlook, with the Relative Strength Index (14) dropping below 40 and the MACD indicator remaining in negative territory. Bears are currently testing support near the September 9 low of $60.87, with further downside targets at the September 8 low of $59.30 and the 78.6% Fibonacci retracement of the July-August rally at $58.15. The measured target for the Head & Shoulders pattern lies below the year-to-date low at $54.71. On the upside, initial resistance is at the $62.20 neckline, and a break above this level would be needed to ease bearish pressure and shift focus toward the September 5 high near $65.00 [1].
CONCLUSION
Silver prices are under significant pressure due to a strong US Dollar and expectations of further Federal Reserve rate hikes, resulting in an 8.5% monthly decline and a break of key technical support levels. Market sentiment remains bearish, with further downside possible unless resistance at $62.20 is reclaimed. The outlook for silver will likely remain weak as long as the US Dollar and yields stay elevated.