Silver prices have dropped by 1.10%, now sitting at $47.70 per ounce. This decline is due to a stronger US Dollar and the Federal Reserve’s tighter monetary policy. As the Fed signals fewer rate cuts, the US Dollar gains strength, making it harder for non-yielding assets like silver to rise. Continuing geopolitical tensions and the potential for a prolonged US government shutdown are adding to the volatility in the precious metals market. The ongoing budget stalemate in the US may delay important economic indicators, creating uncertainty. Despite this, geopolitical and trade tensions still keep some demand for safe-haven assets like silver, helping to stabilize its recent downturn. From a technical perspective, silver is facing resistance around the $49.40 level, suggesting a possible double-top pattern. If this resistance holds, silver could drop further toward $41.80. Conversely, if prices break above $49.40, attention may shift to the 100-period Simple Moving Average at $49.80, possibly leading to a test of the recent peak at $54.86. The slightly downward-sloping 100-period SMA and the RSI falling below 50 indicate increasing bearish momentum in the short term. With silver retreating to $47.70, we’re clearly seeing the effects of a stronger US Dollar and a strict Federal Reserve. The recent pullback from the $49.50 level shows that bearish sentiment is rising. Traders need to be careful since non-yielding assets like silver usually struggle under tough Fed conditions. The uncertainty surrounding the Fed’s next steps will be important in the coming weeks. Currently, the markets assign only a 65% chance of a rate cut in December, down from nearly 85% just weeks ago, after the October Consumer Price Index (CPI) report revealed persistent core inflation at 3.4%. This keeps the Fed from easing further, putting additional pressure on silver prices. Meanwhile, we must consider the supportive factors of geopolitical risk and domestic uncertainty. The US government shutdown has now exceeded the previous record of 35 days set in 2018-2019, creating erratic economic conditions and increasing demand for safe-haven assets. This underlying tension is preventing a more significant sell-off in precious metals. From a technical viewpoint, we’re observing a potential double-top pattern forming near the $49.40 resistance level. If silver fails to break this level, traders might target the neckline at $45.56. A strong break below that support could lead to a larger decline toward $41.80. This high-volatility environment is well-suited for defined-risk options strategies. Traders expecting a drop below $45.56 might consider buying put options, while those betting on safe-haven demand might look at call options if prices break above $49.40. With the CBOE Volatility Index (VIX) currently elevated around 22, options pricing reflects the uncertainty in the market. Looking back, this situation is similar to what we experienced during the 2022-2023 rate hike cycle. Throughout that time, the Fed’s hawkish approach consistently strengthened the dollar, creating significant challenges for silver. History suggests that while the central bank maintains a restrictive policy, any rallies in silver are likely to face selling pressure.

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