Silver surges over 7% after Fed dot plot signals limited rate hike appetite

FUNDAMENTAL OVERVIEW

Silver dipped just below the key $63.00 threshold following the FOMC announcement, but that decline was swiftly reversed.

The Fed implemented the anticipated 25-basis-point rate increase and signalled one additional hike in 2026. After that, the central bank sees rates staying flat through 2027, with cuts resuming in 2028.

The immediate market response was seen as hawkish, even though the Fed's outlook was less aggressive than what markets had already factored in. Before the meeting, the consensus called for one extra hike in both 2026 and 2027. The Fed's projection aligned with the 2026 expectation but indicated no further hike in 2027, whereas markets had been pricing in one increase in 2026 and two in 2027.

So the Fed's projected path turned out to be less hawkish than markets had expected. Fed Chair Warsh came across as more hawkish than anticipated, though his remarks largely echoed the message from his Jackson Hole address, with only minor updates after the rate hike.

After the initial reaction subsided, markets reversed course and silver began climbing. A more thorough analysis of the Fed's decision can be found elsewhere.

Going forward, I would closely monitor the Middle East situation, as $100 oil, rate increases and elevated bond yields could push Trump to end the conflict. A de-escalation phase may already be starting, as Trump has scheduled a meeting with Gulf leaders on Tuesday on the sidelines of the UN General Assembly in New York to talk about next steps in the war with Iran. Notably, the Iranian delegation is permitted to attend.

De-escalation would drive oil prices lower, easing worries about inflation and rate hikes, which would ultimately support silver.

Economic data will also be a major factor. When positioning and market expectations become stretched, even a small shift in data can trigger a significant reversal. If US data starts to disappoint, expectations for aggressive rate hikes will likely diminish, giving silver an extra boost.

SILVER TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, silver dipped below the major $63.00 support but then bounced back strongly and is now approaching the swing high near the $68.00 level. That is where sellers are expected to step in with a defined risk above the swing level to position for a drop back to the $63.00 support. Buyers, meanwhile, will be watching for a breakout to increase bullish bets toward the $71.50 level next.

SILVER TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, the break of the trendline boosted momentum as more buyers entered to target new highs. The natural target is the swing high around the $68.00 handle. Again, that is where sellers are expected to step in to position for a drop to the $63.00 support, while buyers will look for a breakout to extend the rally.

SILVER TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, a minor upward trendline defines the bullish momentum. If a pullback occurs, buyers are expected to lean on the trendline with a defined risk below it to keep pushing into new highs. Sellers, on the other hand, will look for a break to pile in for a drop to the $63.00 support next. The red lines define the average daily range for today.

UPCOMING CATALYSTS

On Tuesday, Trump meets with Gulf leaders, and on Wednesday the Flash US PMIs are released.