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- Silver declines as hawkish Fed remarks reinforce expectations for further interest rate hikes, driving non-yielding asset prices lower.
- Fed’s Musalem warns inflation could stay above 2% without earlier, incremental rate increases.
- Falling oil prices and Middle East diplomatic efforts could offer support for Silver.
Silver price (XAG/USD) inches lower after opening at a bullish gap, trading around $66.00 per troy ounce during Asian hours on Tuesday. Non-yielding Silver remains under pressure as hawkish remarks from Federal Reserve (Fed) officials have reinforced expectations for additional US interest rate hikes.
Musalem flags need for earlier, incremental hikes as inflation risks stay elevated
The Fed’s Musalem delivers a distinctly hawkish tone, with an FXS Speechtracker score of 8/10, stronger relative to the historical average of 7.4/10. Musalem warns that without further policy restraint, inflation is likely to remain substantially above the 2% target over the next 18 months, arguing that interest rates need to rise further to tackle demand- and supply-driven price pressures, including broader commodity shocks beyond oil such as copper. Despite describing the labor market as stable around full employment and not a key source of inflation, Musalem highlights that underlying inflation remains too high at up to 3%, with business contacts planning price increases closer to 3%, reinforcing a bias toward earlier and incremental rate hikes.
The FXS Fed Sentiment Index rises by 0.42 points to 149.96, signaling a solid reinforcement of hawkish expectations in line with the elevated FXS Speechtracker score. At this level, the FXS Fed Sentiment Index remains deeply in hawkish territory, underscoring market anticipation of additional tightening to contain persistent inflation risks for the Dollar.
Goolsbee flags overheating risks as supply shocks cloud Fed’s path to 2%
Fed’s Goolsbee delivered a more forceful inflation message, with a 7.4/10 FXS Speechtracker score standing notably above the 6.4/10 historical average, underscoring heightened policy sensitivity to upside price risks. The emphasis on being “optimistic” about returning to 2% inflation only if there is no further evidence of demand overheating, combined with a clear warning of “no ambiguity” about the Fed’s response to excess demand, tilts the tone moderately hawkish despite ongoing uncertainty over the split between supply shocks and demand-driven inflation. Goolsbee’s insistence that persistent supply shocks must be explicitly incorporated into policy and that fading supply-side inflation is needed for a “credible path” back to 2% suggests the Fed is wary of easing prematurely, a backdrop that is broadly supportive of the Dollar on balance.
However, the white metal could find some support from declining oil prices, driven by expanding diplomatic initiatives to resolve the Middle East conflict and indications of uninterrupted energy supplies from the region. Crude oil itself faces potential downside risk as supply concerns ease alongside accelerating diplomatic efforts to bring an end to the US-Iran war.
Geopolitical developments are taking center stage as US President Donald Trump addresses the UN General Assembly in New York, with a potential side meeting scheduled with Iranian President Masoud Pezeshkian. Throughout the week, President Trump is also expected to conduct high-level talks with Chinese President Xi Jinping and leaders from various Gulf nations. Adding to the diplomatic push, the Trump administration has proposed a $5 billion fund dedicated to reconstructing Middle Eastern infrastructure damaged during the conflict.
Technical Analysis:
In the daily chart, XAG/USD trades at $66.11. The pair holds above both the 9-day exponential moving average (EMA) at $65.37 and the 50-day EMA at $64.92, keeping a constructive bullish bias while price consolidates near recent highs. The Relative Strength Index (14) at 53.37 stays in neutral territory with a slight positive tilt, suggesting that upward pressure is intact but not overstretched, while the elevated FXS Fed Sentiment Index at 149.96 hints that broader policy expectations remain supportive for silver.
On the downside, immediate support is seen at the $66.11 area, followed by the short-term 9-day EMA at $65.37 and then the medium-term 50-day EMA at $64.92, forming a layered demand zone beneath spot. With no clear resistance levels derived from the current indicator set, further gains would likely depend on how price reacts to this support stack, as a sustained break below the 50-day EMA would start to weaken the bullish near-term structure.
