Silver Price Forecast: XAG/USD struggles to extend opening gains amid hawkish Fed bets

The Silver price (XAG/USD) began the day with strong gains, buoyed by a significant drop in oil prices following the announcement of a ceasefire 2.0 between the United States and Iran. However, it was unable to maintain its early momentum, staying above $58.68 throughout the day. As of the latest update, the Silver price rose by 1% to approach $58.20.

The week started on a promising note, as a decline in oil prices limited global inflation expectations due to the US-Iran ceasefire. In a post on Truth Social, US President Donald Trump announced the suspension of planned attacks on Iran, as Tehran agreed to the nuclear deal and the Strait of Hormuz reopened, a crucial route for nearly 20% of global energy supply.

This development has led to underperformance of Silver in recent months, as rising oil prices have driven inflation, forcing central banks to tighten monetary conditions, which is detrimental to non-yielding assets like Silver. Analysts at Deutsche Bank predict two further 25 basis points rate hikes this year, with the CME FedWatch tool indicating a 64.5% likelihood of a Fed rate hike next month.

Trading around $58.20, Silver is displaying a bearish near-term outlook, as it remains below the 20-day Exponential Moving Average ($58.79). The failure to reclaim this short-term EMA suggests that rallies are currently limited, with the Relative Strength Index (RSI) at 46 indicating modest downside pressure rather than a decisive trend.

On the upside, the 20-day EMA acts as initial resistance at $58.79, and a sustained break above this barrier could alleviate the current bearish bias, potentially paving the way for a move toward $60.00. On the downside, the July 17 low of $54.77 is the critical support level. Silver, a precious metal commonly used as a store of value and medium of exchange, is less popular than gold but can serve as a diversification asset for investors.

It can also act as a hedge during periods of high inflation. Investors can acquire physical Silver in coins or bars or engage in trading through Exchange Traded Funds that track its price on international markets. Silver prices are influenced by various factors, including geopolitical instability, economic trends, interest rates, and currency fluctuations. It often follows the movements of gold, and its valuation is determined by the Gold/Silver ratio.