Silver has rebounded to $63, but inflationary risks hold buyers back

Silver (XAG/USD) has rebounded to $63.45 on Wednesday, up 0.16% from its previous day's close. The metal is grappling to regain its footing, following a dip to $62.19 as trading resumed after Tuesday's rejection from the $66.50 zone. In a market environment marked by caution, investors are monitoring the deteriorating situation in the Middle East.

The US-Iran memorandum of understanding expired on Monday, and US President Donald Trump announced on Tuesday that no talks with Tehran are ongoing. Disruptions in maritime traffic through the Strait of Hormuz are heightening tensions in the energy market, raising concerns over the potential inflationary impact of the conflict. This scenario could complicate the Federal Reserve's efforts to tighten monetary policy.

Investors are eagerly awaiting the July FOMC meeting minutes, scheduled for release at 18:00 GMT, to gain insights into the direction of US interest rates. Recent weaker-than-expected labor market and inflation data have decreased expectations of a September rate hike, with only a 32% probability of an increase priced in, according to the CME FedWatch tool.

This shift helps alleviate pressure on precious metals, which generally benefit from expectations of less restrictive monetary policy. Meanwhile, inflation risks due to the energy shock continue to foster the likelihood of additional monetary tightening in the long run. US Treasury yields remain elevated even after a slight dip on Wednesday, curbing the appeal of non-yielding Silver.

The upcoming release of the Fed Minutes could serve as the next catalyst for Silver, as markets evaluate the trade-off between softer US economic data, inflation risks originating from the Middle East conflict, and the future path of interest rates. On the chart, XAG/USD is trading at $63.46, still confined by the 100-period and 200-period SMAs at $64.74 and $64.65, respectively.

The immediate horizontal resistance level lies at $63.50, while the RSI of 44.51 remains below the neutral 50 line, indicating limited recovery attempts for now. The next resistance point is at $63.50, followed by the 200-hour and 100-hour SMAs at $64.65 and $64.74, with a more significant hurdle near the prior horizontal support level around $66.80.

Conversely, the first support level is at $62.60, with a deeper support at $61.00, where buying interest is anticipated if the current pullback persists. Analyst Ghiles Guezout, well-versed in stock market investments, trading, and cryptocurrencies, emphasizes the importance of the Fed Minutes and ECB President Christine Lagarde's speech, along with the FOMC minutes, for traders navigating the current market landscape.