Silver Retreats as Energy Supply Risks Cloud Rate Outlook

Key Moments

Energy Supply Jitters Pressure Silver Prices

Silver prices (XAG/USD) are lower by 1% around $63.80 during the Asian trading session on Friday, as investors react to heightened fears over global energy supplies. The metal is facing renewed selling interest while markets assess the impact of ongoing blockades at the Strait of Hormuz and the Bab al-Mandab Strait, waterways that together handle nearly 27% of the world’s energy shipments.

Restricted flows through these two critical passages are supporting higher crude prices. That backdrop is reinforcing inflation expectations and keeping alive concerns that central banks could be forced to maintain or even raise interest rates. Such a scenario tends to be unfavorable for non-interest-bearing assets like Silver.

WTI Oil is currently trading roughly flat around $80.45. Although crude has encountered mild selling over recent sessions, worries about constrained supply are seen as a factor that could prevent a deeper downside move in oil prices.

TD Securities: Oil Pullback Seen as Temporary

TD Securities notes that the recent easing in crude oil’s rally has led to softer short-term price action and some modest selling pressure in WTI. According to the bank’s commodity strategists, the latest setback has not altered their constructive view on the medium-term outlook for crude.

The bank observes that “easing near-term momentum” has “also catalysed modest selling in WTI crude on the day.” Even so, its strategists “continue to highlight that fundamental tightness across crude and product markets should ultimately support further upside,” signaling they regard the current pullback as a pause within a broader positive trend for oil.

Fed Expectations Offer Some Support to Silver

On the monetary policy front, changing expectations around the Federal Reserve’s next moves are helping to cushion Silver’s decline. Market participants are increasingly scaling back the likelihood of a rate increase at the Fed’s September meeting, reflecting a modest cooling in United States inflation and mounting worries about labor market conditions.

Data from the CME FedWatch tool indicate that the probability of the Fed leaving policy rates unchanged in September has risen to nearly 65%. This marks a sharp shift from a month earlier, when markets reflected a 75% probability that the Fed would deliver two rate hikes by the end of the September meeting. The reduced odds of tighter policy are seen as a factor limiting downside in XAG/USD.

Technical Picture: Uptrend Intact Despite Pullback

From a technical standpoint, XAG/USD is changing hands near $63.78, holding above the 20-day Exponential Moving Average (EMA) at $61.78. This configuration points to a positive short-term bias, with prices staying comfortably above a key trend indicator.

The Relative Strength Index (RSI) sits at 56, remaining in positive territory without signaling overbought conditions. This suggests that buyers remain in control while still having scope to extend gains if momentum resumes.

Initial support is located around the 20-day EMA at $61.78, which currently underpins the prevailing upward structure. A move toward that zone would be the first area to monitor for potential stabilization if selling intensifies. A more pronounced decline would bring attention to the broader momentum floor implied by the RSI region near 56, as long as spot prices remain above the $61 area. On the topside, the June 16 peak around $71.20 stands out as the next significant resistance level.