Silver (XAG/USD) experienced a sharp decline on Tuesday, falling over 2.5% to trade around $73.25, its lowest level since April 13, as the market reacted to expectations of prolonged higher interest rates and persistent inflation risks. The downside momentum was fueled by rising US Treasury yields, which diminished the appeal of non-yielding assets like silver, and by elevated oil prices stemming from ongoing Middle East supply disruptions. These factors have contributed to silver's more than 20% drop since the onset of the US-Iran war, despite a partial recovery from its March low [1].
The US Dollar remained supported due to a lack of progress in US-Iran talks to end the war, further pressuring silver prices. While geopolitical tensions typically benefit precious metals, the anticipation of tighter monetary policy by global central banks has outweighed these effects. Market participants are now focused on the upcoming Federal Reserve monetary policy decision, where the consensus is that rates will remain unchanged. However, with US inflation still above the Fed's 2% target and oil prices surging, traders are keenly awaiting forward guidance on the future path of interest rates. Higher borrowing costs are expected to continue weighing on silver [1].
Technical analysis indicates a bearish near-term outlook for XAG/USD, with the price trading below both the 50-day and 100-day Simple Moving Averages (SMAs), which are showing early signs of a bearish crossover. Momentum indicators reinforce this negative tone: the Relative Strength Index (RSI) is near 42, the MACD line is just below zero, and the Average Directional Index (ADX) is subdued around 12, suggesting a weak and potentially range-bound trend. Key resistance levels are identified at $78.50-$79.50 and $90, while support is seen at $70 and the 200-day SMA near $62.40 [1].
CONCLUSION
Silver's recent decline reflects the market's concerns over persistent inflation and the prospect of higher-for-longer interest rates, which have overshadowed traditional safe-haven flows. With the Federal Reserve's policy decision looming, traders are closely watching for signals on future rate moves, as these will likely dictate the near-term direction for XAG/USD.