Silver prices have declined by 1.10%, reaching $47.70 per ounce, influenced by a stronger US Dollar and the Federal Reserve’s stance. The grey metal struggles as the Federal Reserve signals limited rate cuts, causing the US Dollar to strengthen, thus capping gains for non-yielding assets such as silver.

Persisting geopolitical tensions and potential prolonged US government shutdown contribute to increased volatility in the precious metals market. As the US government remains in a budget stalemate, this could delay key economic indicators, adding uncertainty. Geopolitical and trade tensions keep a degree of demand for safe-haven assets like silver alive, helping manage its recent corrections.

Technically, silver faces resistance near the $49.40 mark, suggesting a potential double-top pattern. This resistance, if unbroken, may lead to further declines towards $41.80. Breakthroughs above $49.40 could focus attention on the 100-period Simple Moving Average at $49.80, with potential to test the recent peak at $54.86. The mildly downward-sloping 100-period SMA and RSI dropping below 50 indicate growing bearish momentum in the short term.

With silver retreating to the $47.70 mark, we are seeing the direct impact of a strengthening US Dollar and a restrictive Federal Reserve. This pullback from the recent $49.50 attempt signals that bearish sentiment is building. Traders should be cautious, as non-yielding assets like silver often struggle when the Fed talks tough.

The uncertainty around the Fed’s next move is a key factor for the coming weeks. While markets still price in a 65% chance of a rate cut in December, this is down from nearly 85% just a few weeks ago after the October Consumer Price Index (CPI) report showed core inflation remains sticky at 3.4%. This data gives the Fed room to delay any further easing, which would likely keep pressure on silver prices.

At the same time, we cannot ignore the supportive elements of geopolitical risk and domestic uncertainty. The partial US government shutdown has now surpassed the 35-day record set back in 2018-2019, creating unpredictable economic conditions and boosting safe-haven demand. This underlying tension is what’s preventing a more dramatic sell-off in precious metals.

From a technical standpoint, we are watching a potential double-top pattern form near the $49.40 resistance level. A failure to break above this level could see traders target the pattern’s neckline at $45.56. A decisive break below that support could trigger a much larger downward move toward the $41.80 area.

This high-volatility environment is ideal for defined-risk option strategies. Traders anticipating a drop below $45.56 could look at buying put options, while those betting that safe-haven demand will win out might consider call options on a break above $49.40. With the CBOE Volatility Index (VIX) currently elevated around 22, options pricing reflects this market uncertainty.

Looking back, this situation is reminiscent of the market dynamics we saw during the 2022-2023 rate hike cycle. In that period, the Fed’s hawkish stance consistently strengthened the dollar and created significant headwinds for silver. History suggests that as long as the central bank remains restrictive, any rallies in silver are likely to be sold into.