Silver (XAG/USD) extended its decline on Wednesday, trading around $65.20 at the time of writing, marking a 2.80% drop for the day and retreating further from the $68.00 area. The decline was attributed to a stronger US Dollar and a hawkish repricing of the US interest rate outlook, which weighed on precious metals overall [1]. The Federal Reserve remains the main headwind for silver, having raised its benchmark interest rate by 25 basis points at its September meeting, bringing the target range to 3.75%-4%. The Fed also signaled that another rate hike could come before the end of the year [1].
Several Fed officials, including St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee, have supported the possibility of further monetary tightening amid persistent inflation risks. Boston Fed President Susan Collins and Richmond Fed President Tom Barkin have also left the door open to additional rate hikes. Markets are now pricing in a nearly 90% chance of another rate hike in December, according to the CME FedWatch tool. The prospect of US interest rates remaining higher for longer supports the US Dollar and increases the opportunity cost of holding non-yielding assets such as silver [1].
Geopolitical developments in the Middle East are providing less support to precious metals. On the sidelines of the United Nations General Assembly, US Special Envoy Steve Witkoff reported lengthy indirect discussions between the United States and Iran, while US President Donald Trump described talks with Iranian representatives as very productive. Tehran indicated it could reopen the Strait of Hormuz under certain conditions, including an easing of US military pressure and the blockade of Iranian ports. Signs of diplomatic progress are helping reduce some of the geopolitical risk premium that had previously supported demand for safe-haven assets. However, tensions remain unresolved as negotiations continue and new US sanctions targeting Iranian aviation come into force [1].
From a technical perspective, XAG/USD trades at $65.22, maintaining a mildly bearish near-term bias as it holds below the 100-period simple moving average (SMA) at $66.01 and the nearby horizontal barrier at $65.80. The 200-period SMA at $64.88 offers underlying trend support, but the metal appears capped by the overhead averages. The Relative Strength Index (14) around 34 suggests mild bearish momentum [1].
CONCLUSION
Silver prices have fallen sharply due to expectations of further Fed tightening and easing geopolitical tensions between the US and Iran, which have reduced safe-haven demand. With markets pricing in a high probability of another rate hike and technical indicators pointing to continued bearish momentum, silver may remain under pressure in the near term.