Silver Drops to Multi-Week Low as Dollar Rises Sharply

Key Moments

Geopolitical Tensions Pressure Silver

Silver prices fell sharply in early European trade on Thursday, with XAG/USD sliding toward $72.30 and briefly trading below $72.50. The decline took the metal to its lowest level since May 6, as investors reacted to renewed geopolitical tensions.

According to a Wednesday report from Reuters, the US military conducted fresh overnight strikes in Iran, targeting a military facility and downing four Iranian one-way attack drones that posed a threat near the Strait of Hormuz. The escalation in the Middle East pushed crude oil prices higher and supported the US Dollar, exerting downward pressure on the USD-denominated precious metal.

Focus on US PCE Inflation Data

Market participants are now closely watching the upcoming release of the US Personal Consumption Expenditures (PCE) inflation data later on Thursday, which could help shape expectations for the US interest rate outlook this year.

Consensus forecasts point to the headline PCE Price Index rising 3.8% year-on-year in April, compared with 3.5% in March. The core PCE Price Index, which excludes more volatile components, is projected to increase 3.3% year-on-year in April, versus 3.2% previously.

The PCE figures for April are expected to be the key macro highlight of the session. A stronger-than-anticipated reading could bolster expectations for an interest rate hike by the US Federal Reserve later this year, a scenario that would likely weigh further on the non-yielding white metal.

Technical Picture: Bias Remains Bearish

From a technical standpoint, the daily chart shows XAG/USD trading firmly below the 100-day simple moving average (SMA) and the 20-day SMA of the Bollinger Bands, preserving a negative near-term outlook despite a modest rebound from recent lows. The Relative Strength Index (RSI) stands at 41.76, below the neutral 50 threshold, signaling lingering downside pressure rather than a convincing recovery.

Key Technical Levels for XAG/USD

On the upside, the first barrier to monitor is the Bollinger Bands 20-day SMA near $77.95. A move above this level would expose the May 25 peak at $78.83. Beyond that, the 100-day SMA at $81.30 comes into view, while the upper Bollinger Band around $86.86 serves as a more distant ceiling if a short-covering rally gathers momentum.

On the downside, the April 30 low at 71.22 forms the next notable support area. Below that, the 70.00 psychological handle becomes relevant. A decisive break toward the lower Bollinger Band, roughly at $69.00, would open the door to additional weakness toward lower, untested support areas on the daily chart.

(The technical analysis of this story was written with the help of an AI tool.)

Silver as an Investment Asset

Silver is a widely traded precious metal that has long served as a store of value and medium of exchange. While it tends to attract less attention than Gold, investors often consider Silver as a way to diversify portfolios, to gain exposure to its intrinsic value, or to potentially hedge during periods of elevated inflation. Access to the metal can be gained via physical holdings, such as coins and bars, or through instruments like Exchange Traded Funds that track its price in international markets.

Drivers of Silver Price Moves

Silver prices can respond to a broad set of influences. Periods of geopolitical stress or deep recession fears can push Silver higher due to its safe-haven appeal, although historically this has been less pronounced than in Gold. As a non-interest-bearing asset, Silver tends to benefit when interest rates fall.

Because Silver is priced in US Dollars (XAG/USD), Dollar fluctuations are also important. A stronger US Dollar generally acts as a headwind for Silver, while a weaker Dollar is usually supportive. Additional factors include investment demand, mining output – with Silver being significantly more abundant than Gold – and recycling flows.

Industrial and Cross-Market Dynamics

Silver has extensive industrial applications, especially in electronics and solar energy, where its high electrical conductivity – greater than that of Copper and Gold – is a key attribute. An acceleration in industrial usage tends to lift prices, while weaker demand can pressure them lower.

Economic developments in the US, China, and India also matter. The sizable industrial bases of the US and particularly China incorporate Silver into various processes, while in India, consumer demand for Silver jewelry plays a meaningful role in price formation.

Silver frequently moves in tandem with Gold. When Gold advances, Silver often follows, reflecting their shared reputation as safe-haven assets. The Gold/Silver ratio, which measures how many ounces of Silver are needed to equal the value of one ounce of Gold, is often monitored to gauge the relative pricing of the two metals. Some investors view a high ratio as signaling that Silver is undervalued or Gold is overvalued, while a low ratio may be interpreted as Gold being undervalued relative to Silver.