Silver (XAG/USD) prices declined by 1% to near $61.80 during the Asian trading session on Monday, marking a pullback after four consecutive days of gains [1]. This correction comes as market experts anticipate further declines in oil prices, which could ease global inflation expectations and potentially support silver prices in the near future [1]. In recent months, silver faced intense selling pressure due to rising oil prices driven by energy supply disruptions from the Middle East conflict [1].
Citi analysts noted that Brent Crude Oil could fall further to $60 by year-end, citing normalizing shipping flows and fading Hormuz disruptions as key factors [1]. Currently, Brent Crude Oil trades 0.5% lower at around $71.80, close to the five-month low of $70.26 recorded last Thursday [1]. The expectation of lower oil prices is seen as a positive for silver, as it may reduce inflationary pressures globally [1].
Additionally, a slight decline in Federal Reserve interest rate hike expectations is also expected to support silver prices. According to the CME FedWatch tool, the probability of at least one Fed rate hike by the end of September has decreased to 53.2%, down from 59.4% a week ago [1]. Investors are now awaiting the release of the FOMC minutes from the June policy meeting, scheduled for Wednesday, which could provide further direction for silver prices [1].
From a technical perspective, XAG/USD is trading lower at around $61.94, facing selling pressure after a mean-reversion move to the 20-day Exponential Moving Average (EMA) at $63.53 [1]. The Relative Strength Index (RSI) is around 42, indicating that downside momentum has cooled but the bias remains negative [1]. A daily close above the 20-day EMA would be needed to ease the current downside bias and potentially open the way for a recovery towards the June 22 high at $67.17 and then $70.00 [1]. Conversely, a drop below the June 24 low of $55.63 could expose silver to further downside [1].
CONCLUSION
Silver prices have retreated amid expectations of lower oil prices and reduced Fed rate hike odds, both of which could support the metal in the near term. Technical indicators suggest downside bias persists, but a break above key resistance levels could trigger a recovery. Investors are closely watching upcoming FOMC minutes for further guidance.