Silver Price Forecast: How is the descending channel keeping sellers in control ahead of Fed?

Silver faces continued selling pressure ahead of the Fed’s monetary policy announcement.
A descending channel continues to contain XAG/USD on the 4-hour chart.
Buying momentum remains subdued with RSI below 50, although a positive MACD suggests stabilisation.

Silver (XAG/USD) remains modestly lower on Wednesday, with traders avoiding aggressive positions before the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT. A slight decline in the US Dollar (USD), however, is cushioning the metal’s losses. The white metal is trading around $5410 at the time of writing, a decline of 0.57% for the day, while staying above Tuesday’s fresh year-to-date low of $52.67.

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After touching a fresh two-week high of 102.49 earlier in the session, the US Dollar Index (DXY) is broadly steady near 102.33. The index measures the Greenback against a basket of six major currencies.

For metals, the Fed’s guidance on the policy outlook is likely to matter more than the rate decision itself. Policymakers are widely expected to keep interest rates at 3.75%-4.00%, following a 25-basis-point increase in September. Risks to inflation remain skewed upwards, partly because Middle East tensions have pushed energy costs higher, even as policymakers maintain their commitment to returning inflation to the 2% target.

Any indication of additional rate increases could therefore underpin the US Dollar and prolong pressure on Silver. As interest rates rise, holding the non-yielding metal carries a higher opportunity cost; Dollar strength also raises its cost for overseas buyers. Conversely, a less hawkish message could weaken the Greenback and support a recovery in Silver.

Can Silver Stabilise Within Its Descending Channel?

The near-term bias for XAG/USD remains bearish on the 4-hour chart, despite a slight improvement in MACD. Prices are still contained within a descending channel and sit below the 50-period, 100-period and 200-period Simple Moving Averages (SMAs).

Although Moving Average Convergence Divergence (MACD) has moved into positive territory, the Relative Strength Index (RSI) remains near 44, below its midline, suggesting limited buying pressure. Together, the indicators point more towards consolidation within a bearish trend than a lasting reversal.

An upside move would first encounter the horizontal resistance near $55.00 and then the 50-period SMA at $55.58. Only a decisive break above these levels would relieve immediate selling pressure and bring the 100-period SMA at $57.41 into view. Further ahead, the descending channel’s upper boundary near $60 and the 200-period SMA around $60.34 provide a more distant ceiling.

Near the channel’s lower boundary, the $52.00-$52.50 area provides the first zone of support. Should prices break below it, losses could extend towards horizontal support at $50.00.

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

Silver: Common Questions Answered

What attracts investors to Silver?

Widely traded by investors, Silver is a precious metal with a long history as both a store of value and a medium of exchange. While Gold enjoys greater popularity, traders may choose Silver for portfolio diversification, its intrinsic value or its potential to hedge against periods of high inflation. Exposure can take the form of physical Silver coins or bars, or investment vehicles such as Exchange Traded Funds that track the metal’s international market price.

What drives changes in Silver prices?

A broad set of influences determines Silver’s price movements. Its safe-haven appeal can lift prices during geopolitical turmoil or concerns over a severe recession, though this effect is less pronounced than for Gold. Lower interest rates generally benefit Silver because it pays no yield. Dollar movements are another key influence, since Silver is priced in US Dollars (USD) as XAG/USD: a firmer Dollar tends to restrain prices, while a weaker one is likely to lift them. Investment demand, recycling rates and mining supply also matter, with Silver far more abundant than Gold.

Why does industrial demand matter for Silver prices?

Industrial applications account for widespread use of Silver, particularly in electronics and solar energy. Its electrical conductivity is among the highest of any metal, exceeding that of Copper and Gold. Stronger demand can push prices higher, whereas weaker demand tends to bring them down. Developments in the US, Chinese and Indian economies can also drive price fluctuations. Large industrial sectors in the US and, especially, China consume Silver across a range of processes, while Indian consumer demand for Silver jewellery is another important influence on prices.

How closely does Silver follow Gold prices?

Gold’s price movements often set the direction for Silver. Their similar safe-haven status means that a rise in Gold typically brings a corresponding advance in Silver. To assess their relative valuations, investors may use the Gold/Silver ratio, which measures how many ounces of Silver equal the value of one ounce of Gold. Some investors interpret a high ratio as a sign that Silver is undervalued or Gold is overvalued. A low ratio, by contrast, may indicate that Gold is undervalued compared with Silver.