Silver Pulls Back as US-Iran Tensions Cloud Outlook

Key Moments

Geopolitics Weigh on Silver as US-Iran Deal Prospects Fade

Silver prices (XAG/USD) edge lower during Asian trading on Tuesday, trading near $65.60 per troy ounce and snapping momentum after two consecutive sessions of gains. The pullback comes as market participants reassess inflation and geopolitical risks amid renewed uncertainty over a potential diplomatic breakthrough between the United States and Iran.

Traders responded to comments from US President Donald Trump, who signaled he was unwilling to renew the interim peace agreement with Iran. He pointed to the continuing naval blockade of Iranian ports as a sign of US leverage and restated his intention to designate a key maritime corridor as US territory under full American control.

On the Iranian side, Foreign Ministry spokesman Esmail Baghaei said that an accord remains out of reach due to security complications and what he described as the “obstructionist behavior of destructive elements.” He emphasized that Iran expects the United States to lift its blockade before progress can be made.

The hardened rhetoric has reinforced concerns about geopolitical instability, contributing to the current soft tone in Silver after its recent advance.

Cooling Fed Hike Expectations Offer Potential Support

Despite the latest dip, the macro backdrop is not uniformly negative for the metal. Silver could find renewed support from diminishing expectations that the Federal Reserve will deliver another interest rate increase in the near term.

A surprise decline in July US Nonfarm Payrolls, combined with subdued consumer price inflation data released last week, has tempered market confidence in additional monetary tightening next month. In response, interest rate pricing has shifted meaningfully.

According to the CME FedWatch Tool, the implied probability of a rate hike at the upcoming Federal Reserve policy meeting has eased to 35%, down from 47% a month ago. Investors are now awaiting the publication of the minutes from the Fed’s July meeting for further clarity on policymakers’ assessment of the labor market, inflation dynamics, and the appropriate policy path.

Investor Positioning in Precious Metals

Strategists at TD Securities describe a broad repositioning under way across the precious metals complex as macro conditions evolve. They point to a combination of moderate inflation, a softer US labor backdrop, muted fears of another sharp rally in oil, and a shift of prices into a higher trading band as catalysts for recent flows.

They note that “the combination of modest inflation, a lackluster U.S. employment environment, little market concern that oil will have another major rally, along with prices moving convincingly into a higher trading range prompted money managers to aggressively increase their long gold exposure.” In their assessment, this environment has encouraged market participants to strengthen their exposure to Gold as the metal consolidates in a higher range.

Technical Picture for XAG/USD

On the daily chart, XAG/USD is quoted at $65.60 and retains a short-term bullish bias. Price action remains above both the nine-day and 50-day Exponential Moving Averages (EMAs), reinforcing a constructive trend setup. The shorter EMA trading above the longer EMA underpins the positive technical structure.

The 14-day Relative Strength Index (RSI) stands at 60.51, firmly in positive territory while not yet indicating overbought conditions. This positioning suggests there may still be scope for additional upside as long as Silver continues to hold above its immediate dynamic supports. A cooling Fed Sentiment Index, now around 134.61, is consistent with a less aggressive policy backdrop for the metal.

On the downside, the nine-day EMA at $64.27 serves as the first key support level, followed by the 50-day EMA at $63.33. A more distant but important horizontal base resides near $55.63. On the upside, a notable resistance zone is identified around the horizontal barrier at $90.03. The current configuration suggests that dips into the clustered EMA area may draw buying interest while that upper ceiling has yet to be challenged.