Silver Price Forecast: XAG/USD rebounds from year-to-date lows as Fed rate decision approaches

• Easing Oil prices support a Silver recovery ahead of the Fed’s interest rate decision.
• Below the 100-day and 200-day SMAs, a succession of lower highs and lower lows maintains the bearish outlook.
• Sellers appear to remain in control, with the daily RSI close to 34 and the MACD in negative territory.

A fresh year-to-date low of $52.67 in Tuesday’s Asian session was followed by a recovery in Silver (XAG/USD). Easing Oil prices have provided some relief while diplomatic efforts to ease tensions in the Middle East continue. XAG/USD stands at around $54.50 at the time of writing, a gain of 0.96% on the day.

Ahead of Wednesday’s Federal Reserve (Fed) interest rate decision, however, strength in the US Dollar (USD) is restraining the metal’s advance. Trading at roughly 102.23 and close to a two-week high, the US Dollar Index (DXY) measures the Greenback against a basket of six major currencies.

A decision to leave rates unchanged at this week’s October FOMC meeting is the expectation of strategists at BNY Markets, broadly matching current market pricing. They write: “We don’t foresee a rate hike at the October FOMC tomorrow and prefer to place our expectations for further tightening on the December meeting,” adding that, “based on Fed commentary and a steady, if sticky, inflation outlook, we don’t think the weight of the Committee will fall on the hawkish side.”

Since a pause is widely anticipated, attention will turn to the Fed’s policy statement and comments from Chair Kevin Warsh for indications of when the next rate increase may come. By raising the opportunity cost of holding non-yielding Silver, higher interest rates generally put pressure on the metal. A hawkish tone could therefore weigh on Silver, whereas a more cautious message could allow the recovery to continue.

Silver retains a bearish technical bias

Following a brief peak above $70 in late August, XAG/USD has maintained a pattern of lower highs and lower lows on the daily chart. A near-term bearish outlook is reinforced by the metal’s position beneath both the 100-day and 200-day Simple Moving Averages (SMAs).

At around 34, the Relative Strength Index (RSI) points to persistent, though not extreme, oversold conditions. Further corrective losses remain a risk, with the Moving Average Convergence Divergence (MACD) indicator still negative, its line below zero and momentum muted.

Any advance would first encounter nearby horizontal resistance at $55. Beyond that, $60 and the 100-day SMA at $62 present a cluster of obstacles to a recovery should buyers attempt a rebound. Further resistance lies at the $65 horizontal level and the 200-day SMA at $71. These zones would need to be regained to move the broader outlook away from its current bearish bias.

A fall through Monday’s low of $52.67, meanwhile, would bring the psychological support at $50.00 into view. A clear break beneath that threshold could pave the way for a more pronounced decline.

(An AI tool assisted in the preparation of this article’s technical analysis. Find out more.)