Silver Extends Pullback as Energy Markets Gain on Tensions

Key Moments

Geopolitics Support Oil While Silver Lags

Silver prices (XAG/USD) are under pressure during the Asian trading hours on Tuesday, sliding 1.35% to around $61.00. The metal is extending its corrective phase as crude oil draws fresh buying interest following headlines that Iran launched at least two missiles at commercial ships passing through the Strait of Hormuz, a vital route for nearly one-fifth of global energy flows.

The reported attacks on shipping have revived concerns over potential disruptions to energy supply. Market participants have already experienced the inflationary impact of elevated energy prices in recent months amid the ongoing conflict involving the United States (US), Israel, and Iran.

During this period of Middle East tensions, Silver has underperformed. Rising energy costs have intensified inflation worries, stirring fears that major central banks might resort to additional interest rate hikes.

Higher policy rates typically weigh on non-yielding assets such as Silver, as they increase the opportunity cost of holding metals that do not generate income.

Fed Outlook in Focus Ahead of FOMC Minutes

Looking ahead, the release of the Federal Open Market Committee (FOMC) minutes from the June policy meeting on Wednesday is expected to be the primary driver for Silver prices. Investors will scrutinize the document for updated signals on the Federal Reserve’s (Fed) monetary policy stance.

At its June meeting, the Fed kept the federal funds rate unchanged within a 3.50%-3.75% range. The central bank also indicated that it would avoid offering forward-looking guidance on policy rates at the current stage.

Technical Picture: Bearish Tone Persists

XAG/USD is trading lower around $61.50, preserving a bearish short-term profile as spot remains below the 20-day exponential moving average (EMA) at $63.35. The downside bias is supported by the Relative Strength Index (RSI), which is hovering near 41, pointing to ongoing, though not extreme, selling pressure, with rebounds repeatedly failing at the nearby EMA cap.

On the upside, initial resistance is located at the 20-day EMA at $63.35. A decisive move above this barrier would be required to ease current bearish momentum and pave the way for a more constructive recovery.

On the downside, the $60.00 psychological handle is the key support area. A clear break below that level could expose the seven-month trough at $55.63.