Silver Price: What to Expect Ahead of Fed Interest Rate Decision

Summary:

Silver price is on a decline ahead of the Fed interest rate decision on Wednesday. A hawkish tone will be a bearish catalyst for the precious metal.

Silver price is trading lower ahead of the Fed interest rate decision scheduled for Wednesday. On the one hand, investors remain jittery about the rising inflation. On Thursday, the US headline CPI came in at 5% YoY, which is the highest level in 13 years. With the exclusion of the volatile food and energy components, consumer prices rose to its highest level in close to three decades.

However, the Federal Reserve has constantly downplayed the price pressures. In the upcoming interest rate decision, investors will be keen on the bank’s tone with regard to tapering talks. A hawkish tone will be a bearish tone for silver price. If the Fed maintains an accommodative stance, the demand for silver as a hedge against inflation is likely to rise.

Silver price technical forecast

Silver price has extended Friday’s losses. After hitting an intraday high of 28.29 on Friday, the precious metal declined to 27.71 earlier on Monday. At the time of writing, it was down by 0.64% at 27.74. On a two-hour chart, it is trading below the 25 and 50-day exponential moving averages. Based on the fundamental and technical indicators, the outlook is rather bearish.

I expect silver price to remain within a tight range ahead of the Fed interest rate decision. The lower and upper borders of the horizontal channel are likely to be at 27.63 and 27.90 respectively. However, a move below 27.50 and above 28.00 will invalidate this thesis.