Silver (XAG) Forecast: FOMC Risk Freezes Silver Buyers After Oil Break

Silver Holds Its Bid but Buyers Are Waiting on Warsh

Silver caught an early bid Monday after crude oil dropped sharply on the third consecutive night without U.S.-Iran strikes. Treasury yields followed oil lower and that was enough to stop the selling pressure that had been running against the metal for weeks. The gain held through the mid-session but the follow-through never came. The FOMC on Wednesday has both sides frozen with buyers unwilling to chase and sellers without a fresh reason to press while crude is falling. The session went quiet after the opening move and has stayed that way.

At 16:59 GMT, Spot Silver is trading $58.64, up $0.44 or +0.75%.

The gain is real but it tells you more about what stopped than what started. The selling pressure eased. The buying conviction did not arrive.

Daily Spot Silver (XAGUSD) Technical Analysis

Spot silver is edging higher at the mid-session after a successful test of a short-term retracement zone at $57.85 to $57.13. The move turned the July 23 low at $57.06 into a new minor bottom. The key to sustaining the rally will be a breakout over the last minor top at $60.94. That move will likely lead to increased momentum, putting both the main swing top at $63.28 and the 50-day moving average at $65.07 on the radar.

On the downside, a failure to shift momentum to the upside will signal the presence of sellers. Taking out $57.06 will mean the selling pressure is getting stronger. This could lead to a near-term test of the last main bottom at $54.77. If this level is taken out with conviction then look for the selling to possibly extend into $46.48.

Oil Break Removed the Pressure but Did Not Replace It

WTI broke toward $82 and Brent dropped away from the $100 area after Iran said it would halt attacks as long as the United States does the same. Washington paused its campaign after concerns over available targets and military supplies. The 10-year yield moved back toward 4.65% and the dollar stopped climbing. Silver had been dealing with rising crude, rising yields and a firmer dollar all at once last week and Monday took all three off the table for the session.

That was enough to bring in early buyers but not enough to keep them pressing. The Iran pause is conditional and the Strait of Hormuz has not reopened to normal conditions. The Red Sea remains a problem for tanker traffic and the same shipping risks that drove crude above $100 last week are still in the background. One headline puts the oil premium right back into the market and the inflation trade comes with it.

The session went quiet after the opening move because nobody is willing to chase lower oil until they see whether the pause survives more than a weekend. Silver is holding above the early lows and that is constructive but the market is clearly in wait mode heading into Wednesday.

Wednesday’s Statement Sets the Direction for the Week

A hold is the most likely outcome but Warsh’s press conference is where silver’s week gets decided. He has been clear about prioritizing price stability since taking the chair and the bond market has already priced a meaningful chance of a July hike with September odds heavily skewed toward tightening. Tougher language on energy costs and inflation in the statement keeps yields and the dollar pointed higher and silver absorbs the hit from both sides.

A hold without any escalation in the inflation message gives Monday’s buyers room to stay and opens the door for silver to build on the early gain through the second half of the week. Silver’s industrial demand side makes the rate risk sharper because higher borrowing costs weigh on manufacturing activity and fabrication demand at the same time higher yields pressure the investment bid. The direction the Fed sets Wednesday determines which side of that trade is in control.

Thursday’s GDP and PCE data at 12:30 GMT either confirm or push back against whatever the market takes from Warsh. A firm GDP number and hot core PCE after a hawkish Wednesday locks the rate pressure in for the rest of the week. A softer reading on either one gives Treasury buyers a reason to stay involved and helps silver defend its ground heading into the close on Friday.

What to Watch

Silver is up because oil and yields eased. It stopped moving because Wednesday is next. The market needs the Iran pause to hold, crude to stay lower and Warsh to pass without adding to the inflation story already priced into the bond market. If all three line up, buyers have room to push silver higher after the FOMC. If any one fails, Monday’s gain becomes another short-lived break from the broader rate pressure that has been controlling this market since February.

The technical picture improved Monday with a successful test of support and a new minor bottom in place. The breakout level above is clear and a move through it opens the path toward the swing top and the 50-day average. Failure to hold support sends the market back toward the main bottom and a break there opens a much deeper decline. Wednesday forces the resolution in both directions.

More Information in our Economic Calendar.