Silver Price Forecast: XAG/USD heads towards 11-month lows following drop below $54.00

• Falling crude oil prices and bargain-hunting may help silver stabilise.
• Near-term inflation worries ease temporarily as Iran, Saudi Arabia, Pakistan, and Turkey hold security discussions.
• An October Fed rate hold is expected by markets, with ECB, BoJ, and BoC policy decisions also approaching.

At around $53.80 per troy ounce during Tuesday’s Asian session, silver (XAG/USD) is losing ground after the previous day’s modest advance. The non-yielding metal remains close to Monday’s 11-month low of $53.01. High energy prices continue to draw attention to inflation risks, underpinning expectations of further monetary tightening. Nevertheless, cheaper oil and bargain-hunting ahead of the Federal Reserve’s (Fed) forthcoming policy decision could provide support and temper the downward pressure on silver.

Renewed diplomatic efforts to ease US-Iran tensions have weighed on crude oil prices, helping to alleviate immediate inflation worries. According to Islamic Republic of Iran Broadcasting (IRIB), high-level talks in Tehran on Monday resulted in Iran, Saudi Arabia, Pakistan, and Turkey agreeing to pursue further security discussions and strengthen regional cooperation. The initial meeting brought together Iran and senior officials representing the Mecca Joint Defence Agreement. In a subsequent joint statement, all four countries committed to continued dialogue and consultations on regional peace, security, and stability.

An 89.5% probability of an October rate hold and an 82.3% chance of a December increase are currently priced into markets, according to the CME FedWatch Tool. Financial markets expect the Federal Reserve to leave interest rates unchanged at its forthcoming October meeting, with another increase potentially following in December. Elsewhere, the European Central Bank (ECB) and Bank of Japan (BoJ) are also set to keep their key rates steady. The Bank of Canada (BoC), by contrast, is expected to raise rates by 25 basis points this week.

Technical Analysis: Silver declines towards oversold territory

Trading at $53.80 on the daily chart, XAG/USD retains a bearish short-term outlook below both its nine- and 50-day Exponential Moving Averages (EMAs). This EMA configuration indicates that those overhead levels are likely to limit any rallies. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 31.06, close to oversold territory, suggesting that downward momentum is stretched but has yet to reverse. With the FXS Fed Sentiment Index consolidating around 127.51, expectations of tight monetary policy continue to favour a cautious stance towards silver.

The nine-day EMA at $55.74 provides the first resistance on the upside, ahead of a more substantial hurdle at the 50-day EMA near $60.74. A break above the latter would be required to soften the prevailing bearish outlook. This dataset offers no clear technical support immediately below the current price, leaving silver exposed to additional losses. Buyers would need to regain the short-term EMA cluster to provide the first indication of stabilisation on the daily chart.

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