HG MARKETS: 

Silver prices extended their downward trajectory on Wednesday, with XAG/USD dropping to a fresh six-month low near $60.74 during the Asian trading session. The white metal has remained under intense selling pressure as investors increasingly believe that the Federal Reserve will maintain a restrictive monetary policy stance in response to persistent inflationary pressures. According to the CME Fed Watch tool, market participants are now assigning high odds to at least two interest rate hikes this year, representing a dramatic shift in expectations compared with earlier forecasts that had pointed to multiple rate cuts. The change in sentiment follows developments in the Middle East that reduced geopolitical risks and contributed to renewed concerns about inflation. Since precious metals such as Silver do not provide any yield, higher interest rates tend to reduce their attractiveness relative to interest-bearing assets, resulting in additional pressure on prices.

Adding to Silver’s weakness, the US Dollar has continued to strengthen on the back of hawkish Federal Reserve expectations. The US Dollar Index (DXY), which measures the Greenback against six major currencies, climbed to around 101.50, its highest level in more than a year. A stronger Dollar makes Silver more expensive for holders of other currencies and often dampens global demand for the metal. Investors are now closely monitoring the upcoming release of the US Personal Consumption Expenditures (PCE) Price Index for May, scheduled for Thursday. The core PCE inflation measure, which excludes volatile food and energy prices and is considered the Federal Reserve’s preferred inflation gauge, is expected to increase to 3.4% year-over-year from the previous reading of 3.3%. A stronger-than-expected inflation report could further reinforce expectations for tighter monetary policy, potentially boosting the Dollar and increasing downside risks for Silver prices.

From a technical standpoint, the outlook for XAG/USD remains firmly bearish as the metal continues to trade significantly below its 20-day Exponential Moving Average (EMA), currently positioned near $68.09. Momentum indicators suggest that sellers remain in control, with the 14-day Relative Strength Index (RSI) hovering around 31.92, just above oversold territory. Although the market appears increasingly stretched after the recent decline, there are still few signs of a meaningful recovery. A decisive break below the psychologically important $60.00 level could trigger another wave of selling and expose the December 4 low at $56.47. If bearish momentum intensifies further, Silver could eventually target the major psychological support level at $50.00. On the upside, the 20-day EMA near $68.09 serves as the first major resistance level, and a sustained move above this barrier would be required to signal a reduction in downside pressure. Until then, traders are likely to remain cautious and continue selling into rallies while momentum indicators reflect ongoing weakness.