Silver Price Forecast: XAG/USD plunges 5% as momentum indicators turn bearish

Silver (XAG/USD) experienced a significant 4.53% decline on Monday, trading around $61.40 as of the writing. Elevated US Treasury yields and the anticipation of additional interest rate hikes from the Federal Reserve (Fed) have led to heavy selling pressure on non-yielding assets like silver. Concerns over higher oil prices persist, driven by persistent disruptions in global energy supplies, which could contribute to more persistent inflation in the US.

This may force the Fed to maintain a restrictive monetary policy stance for a longer duration than initially anticipated. Currently, there is a 68% chance of another interest rate increase at the Fed's October meeting, based on the CME FedWatch tool. The US central bank's rate hike in September and recent hawkish remarks from several Fed officials have fueled this expectation.

The benchmark 10-year US Treasury yield is near its highest level in nearly two decades, increasing the opportunity cost of holding precious metals that offer no interest. This factor, along with geopolitical tensions and their implications for global energy supplies, adds to the pressure on oil prices and the safe-haven US Dollar (USD), further contributing to silver's sharp decline.

Furthermore, upcoming US economic data will provide investors with insights into refining their expectations for the interest rate outlook.