Silver (XAG/USD) rebounded to near $73.50 during the European session on Thursday after hitting a four-week low of $71.79 earlier in the day, but the recovery was described as lacking fundamental support and the outlook remains uncertain [1]. The price action comes amid renewed Middle East tensions, specifically the exchange of attacks between the United States and Iran, which has also led to higher oil prices and increased concerns about inflation [1][2]. A spokesperson from the Iranian Foreign Ministry condemned strikes near the Strait of Hormuz, a critical passage for nearly 20% of global energy supply [1].
Despite the typical safe-haven demand for precious metals during geopolitical crises, both silver and gold have underperformed. This is attributed to traders pricing out dovish Federal Reserve bets due to rising energy prices and inflationary pressures, which bode poorly for non-yielding assets like silver and gold [1][2]. According to the CME FedWatch tool, the probability of the Fed holding rates steady this year is 43.1%, with the remainder favoring at least one rate hike—a sharp reversal from expectations of two rate cuts before the Middle East conflict escalated [1].
Gold prices fell to a two-month low, with spot gold trading 1.6% lower at $4,385.85 an ounce and U.S. gold futures down 1.3% to $4,389.70, marking the lowest levels since March 26 [2]. The sell-off in gold was driven by a stronger U.S. dollar, which makes gold more expensive for international buyers [2]. Technical analysis for silver shows it remains below key resistance levels, with the 20-day EMA at $77.03 and immediate support at $70.00; a break below $70.00 could expose silver to further downside toward $66.71 [1].
Analyst opinions remain mixed but generally constructive for the medium term. UBS strategists reiterated a bullish stance on gold, citing central bank demand, reserve diversification, and the prospect of easier Fed policy later in the year, though they revised their year-end gold price target down to $5,500 from $5,900 per ounce [2]. Bank of America set a year-end gold target at $5,093, with upside risks due to supportive macro conditions, but warned that a sustained dollar rally, higher real rates, and increased scrap supply could pose downside risks [2]. Kepler Cheuvreux strategists increased their exposure to gold, noting its high correlation to oil prices [2].
Investors are awaiting the U.S. Personal Consumption Expenditure Price Index (PCE) data for April, which is expected to provide further direction for precious metals [1].
CONCLUSION
Both silver and gold prices have come under pressure due to renewed Middle East tensions, higher oil prices, and shifting expectations for U.S. interest rates. While the near-term outlook remains bearish, several analysts maintain a positive medium-term view, citing potential for easier monetary policy and ongoing central bank demand. Market participants are closely watching upcoming U.S. inflation data for further cues.