Silver Prices Sink as US Dollar Strength Drives Precious Metal Lower

Silver prices are struggling to rebound as the US Dollar Index surges to its highest level in over a year, fueled by long-term yields at multi-decade highs and markets pricing in another Federal Reserve rate hike in Q4.

According to John Velis, analyst at BNY Markets, it's not long-term inflation driving yields higher, but rather perceptions of central bank credibility, markets are expecting the Fed (and other central banks) to raise rates in response to rising inflation.

This has resulted in a nearly 2% USD rally in September, which is weighing heavily on precious metals like Silver. The XAG/USD pair remains practically flat on Tuesday, trading at its lowest levels in nearly two months around $60.80, failing to find follow-through above $61.00.

Technical analysis suggests that the price action has broken below the neckline of a large Head & Shoulders pattern, with momentum indicators reinforcing the bearish view. Bears are pushing against support around the September 9 low of $60.87, and further down, the next target might be the September 8 low at $59.30.