Silver Price Forecast: XAG/USD advances steadily toward the high $23.80s ahead of the FOMC’s decision

• Silver remains trading at around $23.80s ahead of the Federal Reserve's last monetary policy meeting of 2022.
• Last Tuesday’s softer inflation CPI in the US paved the way for 50 bps rate hikes.
• Most analysts estimate that the Fed will raise rates by 50 bps.

Silver price is trading with solid gains as investors prepare for the Federal Reserve’s (Fed) monetary policy decision on Wednesday, following the release of softer-than-expected inflation data in the United States (US). Therefore, most analysts expect the US central bank to adjust the tightening size, though the rates’ peak remains unknown. At the time of writing, the XAG/USD is trading at $23.85, above its opening by 0.64%.

Sentiment remains upbeat, as shown by US stocks climbing ahead of the Fed’s decision. The main spotlight in the economic calendar is the Federal Reserve Open Market Committee (FOMC) decision, with analysts estimating a 50 bps rate hike by the Fed. The CME FedWatch Tool portrays odds for a 50 bps are at 82% vs. 18% chances of a 75 bps increase.

During a speech on November 30, Federal Reserve Chairman Jerome Powell said that interest-rate hikes in a smaller size might be “appropriate,” adding that it could happen as soon as the December meeting. Therefore, traders began to repriced in a less hawkish Fed, although Powell pushed back against a Fed pivot, stating that “the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.”

In the meantime, the US Dollar Index, a gauge of the buck’s value against a basket of six currencies, stumbles 0.26%, down at 103.734, following a softer-than-estimated US inflation data on Tuesday.

The US Department of Labor revealed that November’s Consumer Price Index (CPI) rose less than the 7.3% YoY expected to 7.1%. The so-called core CPI for the same period, which excludes volatile items like food and energy, printed 6.0% vs. 6.3% estimates. The reaction to the data sent the S&P 500 rallying to fresh three-month highs.

Money market futures seem to indicate an upcoming rise in the Federal Funds rate, making it peak at 5.01%. Eurodollar futures portrayed traders speculating that the Federal Reserve would make its first rate cut of around 20 bps by September 2023.

Silver (XAG/USD) Price Analysis: Technical outlook

XAG/USD remains upward biased and rallied above $24.00, on traders speculating that the Federal Reserve might not be as aggressive as inflation continues to slow down. Silver’s rally stalled at around $24.00 per troy ounce as traders brace for the US central bank decision. It should be said that a dovish statement could pave the way above $24.00, exacerbating a rally toward $25.00. Otherwise, a hawkish-than-expected reaction could send the white metal sliding below $23.00, ahead of a fall below the 20-day Exponential Moving Average (EMA) at $22.38.