AI capex plans weigh on Silver, not hawkish Fed bets or Mideast risks

• An acceleration in AI spending signalled by US hyperscalers accompanies Silver’s slide to a new 11-month low around $52.60.
• A significant increase in 2027 capex is expected by Alphabet, the company said on Wednesday.
• The Federal Reserve is almost certain to increase interest rates at its December meeting.

Expectations of a hawkish Federal Reserve (Fed) at its December meeting, the risk of renewed escalation in Middle East conflicts and a further upward revision to Alphabet’s Artificial Intelligence (AI) spending plans are weighing heavily on Silver. Against these headwinds, the Silver price (XAG/USD) touches a new 11-month low around $52.60 in Thursday’s European trading session.

Fed outlook remains hawkish

Following September’s increase, the Fed held the fed funds rate at 3.75–4.00%, delivering the widely expected pause, according to analysts at MUFG/BTMU. However, they emphasise that the decision "included two dissents in favour of another rate increase," reflecting the committee’s persistent hawkish leanings. The analysts also point out that Fed Chair Kevin Warsh "reiterated the Fed’s commitment to returning inflation to 2%".

Investors continue to anticipate additional action this year, MUFG/BTMU say, noting that "markets continue to price around an 87% probability of a December rate hike," in their assessment.

In principle, Fed interest rate increases are unfavourable for assets that pay no yield, including Silver.

An immediate adverse reaction in Silver is nevertheless less likely, given that financial markets have been confident for weeks that the central bank will raise rates in December.

US and Israel prepare for renewed strikes on Iran

In a note, Deutsche Bank strategists stated 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." Meanwhile, Danske Bank’s research team points to further support from geopolitical concerns: in his post-election address, Israel’s Prime Minister (PM) Benjamin Netanyahu raised the prospect of “renewed joint action with President Trump against Iran”.

Although concerns about renewed escalation in the Middle East have strengthened expectations of a bullish outlook for oil, WTI Oil is trading 0.5% lower at around $100.74 at the time of writing. That decline rules out expectations of an immediate bearish effect on Silver.

Higher hyperscaler AI capex plans appear to weigh on Silver now

Alphabet kept its full-year capital expenditure forecast unchanged on Wednesday. This followed an increase in guidance to between $195 billion and $205 billion during the second quarter (Q2), from $190 billion in its Q3 earnings call. Annual capex is forecast to surpass $200 billion and 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,” in outlining the company’s plans.

Yields on government-backed securities are likely to rise following an upward revision to US hyperscalers’ AI spending plans. This would make non-yielding assets such as Silver less attractive.

Meta likewise reaffirmed substantial AI infrastructure spending plans last week. In a note, Deutsche Bank observed that Meta has “slightly boosted its 2026 capex plan from a $130bn-145bn range to $135bn-145bn,” reflecting its ongoing commitment to AI investment.

Silver Remains Under Pressure Below Its 20-Day EMA

Trading at $52.91 on the daily chart, XAG/USD retains a bearish near-term bias, with spot prices well beneath the 20-day Exponential Moving Average (EMA) of $57.10. Remaining below this short-term trend indicator suggests that rallies are likely to meet resistance. Meanwhile, a Relative Strength Index (RSI) reading of 30.01 moves into oversold territory, suggesting that downward momentum is stretched without yet showing a reversal.

The first upside hurdle is the 20-day EMA at $57.10. Recoveries are likely to encounter selling there unless buyers establish a sustained daily close above that level. As noted earlier, an RSI close to 30 indicates oversold conditions, which could temporarily cushion the downtrend. Nevertheless, the technical outlook will continue to favour renewed weakness on corrective rebounds until XAG/USD regains the $57 area.

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