Silver Price Forecasts: XAG/USD retreats below $85.00 as market sentiment sours
- XAG/USD retreats to levels below $85.00 after rejection at $87.21.
- Investors are turning cautious as the US-Iran peace process reaches a dead end.
- US Treasury yields and the US Dollar appreciate on Tuesday ahead of the US CPI release.
Silver (XAG/USD) accelerates its reversal in the early European session on Tuesday, trading at $84.80 at the time of writing, after rejection at two-month highs right above $87.00 earlier in the day. The pair has snapped a 4-day rally, weighed down by higher US Treasury yields and a stronger US Dollar, as market sentiment soured amid the deadlock in the US-Iran peace process.
The Greenback is drawing support from cautious market sentiment, and the US-Iran ceasefire teeters after Tehran rejected the latest US peace proposal, raising concerns about a resumption of hostilities. US President Donald Trump said on Tuesday that the ceasefire is on "life support," and the possibility of a resumption of hostilities starts to be seen as an option.
In the macroeconomic front, traders await April's US Consumer Price Index (CPI) release, which is expected to show that annual inflation accelerated to 3.7%, its highest level since September 2023. Core inflation is seen growing by a more moderate 2.7% yearly rate, from 2.6% in March, yet at levels significantly above the Federal Reserve’s (Fed) target rate. Investors are wary of a higher-than-expected inflation reading, which will strengthen the case for a hawkish turn in the Fed's forward guidance.
Technical Analysis: Silver is in a bearish correction
XAG/USD's technical picture shows the constructive bias still in place with technical indicators pulling back from heavily overbought levels after a sharp rally on Monday. The Relative Strength Index (RSI) has eased back toward the upper-mid range near 68, while the Moving Average Convergence Divergence (MACD) indicator remains in positive territory, hinting that bullish momentum is moderating but not yet exhausted.
Bears are likely to meet a strong support area between the April 17 high near $83.00 and the May 7 high, around 82.15. The trendline support from early May lows is now around $82.25. If these levels give way, the next target would be the May 11 low near $79.00.
On the topside, immediate resistance is seen at session highs, near $87.20. Further up, bulls would target the March 10 high in the $90.00 area.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
