Silver (XAG/USD) prices declined to around $65.60 per troy ounce during Asian trading hours on Tuesday, following two consecutive days of gains. The drop comes as traders react to renewed uncertainty over US-Iran diplomatic relations. US President Donald Trump stated he was not interested in extending the interim peace deal, referencing the ongoing naval blockade of Iranian ports and proposing to declare the critical waterway as US territory under total American control. In response, Iranian Foreign Ministry spokesman Esmail Baghaei said an agreement remains elusive due to security complexities and what he described as 'obstructionist behavior of destructive elements,' insisting that the US must first lift its blockade before progress can be made [1].
Despite the geopolitical tensions, silver prices could find support from shifting expectations regarding US monetary policy. A recent, unexpected decline in July US Nonfarm Payrolls and modest consumer price inflation data have reduced market anticipation of a Federal Reserve rate hike at the upcoming policy meeting. According to the CME FedWatch Tool, the probability of a rate hike has dropped to 35%, down from 47% a month earlier. Investors are now awaiting the release of the minutes from the Fed’s July meeting for further guidance [1].
Strategists at TD Securities note that a combination of modest inflation, a weak US employment environment, and little market concern over oil prices have led money managers to increase their long gold exposure. This environment has encouraged investors to favor precious metals, including silver, as prices move into a higher trading range [1].
Technically, XAG/USD maintains a bullish near-term bias, trading above both the nine-day and 50-day Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) at 60.51, indicating positive momentum without overbought conditions. Immediate support is seen at the nine-day EMA ($64.27) and the 50-day EMA ($63.33), while resistance is noted at $90.03. The Fed Sentiment Index cooling toward 134.61 suggests a less aggressive policy backdrop for silver [1].
CONCLUSION
Silver prices have retreated amid US-Iran diplomatic uncertainty, but a less hawkish Federal Reserve outlook and supportive technicals may limit further downside. Investors are closely watching upcoming Fed communications for additional direction, while the broader macro environment continues to favor precious metals exposure.