Silver under pressure from AI capex plans, not hawkish Fed bets or Mideast risks

• $52.60: Silver slides towards a new 11-month low as US hyperscalers flag faster AI spending.
• A significant increase in 2027 capex is expected, Alphabet said on Wednesday.
• The Federal Reserve is considered almost certain to raise rates at its December meeting.

$52.60 is the approximate level of Silver’s new 11-month low. XAG/USD reached that level during Thursday’s European session. Heavy selling reflects several headwinds: hawkish expectations for the Federal Reserve’s (Fed) December meeting, the risk of renewed escalation in Middle East conflicts, and another increase in Alphabet’s Artificial Intelligence (AI) spending plans.

3.75–4.00% Fed Hold Leaves December Hike in Focus

Following September’s increase, the Fed kept its fed funds rate at 3.75–4.00%, as widely expected, according to analysts at MUFG/BTMU. They emphasise, however, that the decision "included two dissents in favour of another rate increase," signalling persistent hawkishness within the committee. The analysts also point out that Fed Chair Kevin Warsh "reiterated the Fed’s commitment to returning inflation to 2%".

Investors still anticipate further policy action this year, MUFG/BTMU add, noting that "markets continue to price around an 87% probability of a December rate hike,".

Higher Fed interest rates are, in principle, unfavourable for assets that offer no yield, including Silver.

An immediate drag on Silver prices looks less likely, however, because financial markets have expected a December rate increase for weeks.

US and Israel Prepare Renewed Attacks on Iran

In a research note, Deutsche Bank strategists said that "the Wall Street Journal (WSJ) reported the United States (US) President Donald Trump’s administration warning Gulf states to be prepared for a new operation against Iran after the midterms." Danske Bank’s research team points to another source of geopolitical support: Israel Prime Minister (PM) Benjamin Netanyahu’s post-election speech, in which he raised the possibility of “renewed joint action with President Trump against Iran”.

Concern over another escalation in Middle East risks has strengthened expectations of a bullish outlook for oil. Yet WTI Oil is down 0.5% at around $100.74 at the time of writing, ruling out an immediate bearish effect on Silver from that channel.

Higher AI Capex Plans Appear to Weigh Directly on Silver

Alphabet left its full-year capital expenditure forecast unchanged on Wednesday. It had raised guidance to between $195 billion and $205 billion during the second quarter (Q2), from $190 billion in its Q3 earnings call. Annual capex is projected to surpass $200 billion, then exceed $300 billion in 2027. CNBC reported that Alphabet finance chief Anat Ashkenazi told analysts on an earnings call: “We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call,”

Government-backed securities are likely to offer higher yields following the upgrade to US hyperscalers’ AI spending plans. That outcome would reduce the attraction of non-yielding assets such as Silver.

Meta reaffirmed substantial AI infrastructure spending plans last week as well. In a note, Deutsche Bank said the company had “slightly boosted its 2026 capex plan from a $130bn-145bn range to $135bn-145bn,” highlighting its sustained commitment to AI investment.

$57.10 EMA Caps Silver’s Technical Outlook

At $52.91 on the daily chart, XAG/USD retains a bearish short-term bias. Spot prices sit well below the 20-day Exponential Moving Average (EMA) of $57.10, suggesting that rallies are still likely to meet resistance. Meanwhile, the Relative Strength Index (RSI) has slipped into oversold territory at 30.01. Downward momentum therefore appears stretched, but there is no reversal yet.

The 20-day EMA at $57.10 provides the first upside resistance. Recoveries are likely to encounter selling there unless buyers establish a sustained daily close above it. On the downside, the previously noted RSI reading near 30 indicates oversold conditions, potentially offering a temporary cushion against the bearish trend. Until XAG/USD recovers the $57 area, however, the technical outlook continues to favour renewed weakness following corrective rebounds.

(The technical analysis of this story was written with the help of an AI tool. Know more.)