Silver Extends Gains as Fed Outlook Boosts Demand

Key Moments

Silver Jumps as Oil Rally Stalls

Silver prices (XAG/USD) are advancing sharply, rising more than 3% to trade close to $58.20 during the early European session on Tuesday. The precious metal is gaining traction as the recent surge in oil prices pauses, with market sentiment improving on hopes for renewed diplomatic engagement between the United States and Iran after weeks of heightened military tensions.

At the time of writing, WTI Oil is down 0.45% and trading near $81.90. This pullback follows a move on Monday when WTI briefly reached a new monthly peak at $84.42 before correcting lower.

Since the beginning of the conflict in the Middle East, elevated oil prices driven by concerns over energy supply disruptions have unsettled global inflation expectations. This dynamic has strengthened expectations for additional interest rate hikes from major central banks, a backdrop that has generally weighed on non-yielding assets such as Silver.

Geopolitical Developments and Fed Expectations

Market risk appetite has been supported by signs of possible de-escalation between the US and Iran. According to comments from a spokesperson in Tehran, Iran has received a proposal from mediators for a 10-day halt in strikes with the US as part of efforts to revive an interim agreement. The confirmation of this proposal has reassured investors that diplomatic negotiations between the parties remain active.

On the US monetary policy front, traders are positioning for the Federal Reserve to leave interest rates unchanged at its meeting next week. This expectation is reflected in pricing captured by the CME FedWatch tool, which suggests market participants are not anticipating an imminent policy shift.

Silver Technical Picture

In technical terms, XAG/USD is trading higher around $58.12 but retains a bearish short-term tone, as it is still positioned below the 20-period exponential moving average (EMA) at $59.65. Price action holding under this short-term trend indicator indicates that upside attempts remain constrained for now.

The Relative Strength Index (14) is currently at 41.94. The oscillator has rebounded from oversold territory, yet it still indicates that the ongoing move is more of a corrective bounce than the start of a sustained bullish trend.

On the upside, initial resistance is seen at the 20-day EMA located at $59.65. A clear break above this level would be required to alleviate current downside pressure and potentially pave the way for a more substantial recovery.

To the downside, the low recorded on July 17 at $54.77 remains the critical support area. A sustained move below this threshold would reinforce the bearish structure.