Silver prices edged lower on Tuesday as traders booked profits following a sharp relief rally driven by the US-Iran peace framework and declining oil prices. XAG/USD traded near $69.85 in early European dealing, retreating from a weekly high as market focus shifted from geopolitics to the Federal Reserve's upcoming policy decision.
The pullback appeared measured rather than disorderly, with lower energy costs easing some inflation concerns and the dollar hovering near recent lows. However, silver still faces a challenging technical setup, as momentum indicators suggest buyers have yet to regain control of the short-term trend.
Fed Expectations Keep Silver Supported
The central question for silver is whether the Fed signals reduced inflation worries following the drop in oil prices. The US central bank is widely expected to hold rates in the 3.50% to 3.75% range this week, but the statement and Chair Kevin Warsh's comments will carry more weight than the decision itself.
Silver, like gold, does not pay interest, making it sensitive to shifts in rate expectations and the dollar. According to CME FedWatch data, traders have reduced the probability of a December rate hike to about 58%, down from nearly 70% last week. Edward Meir, an analyst at Marex, told Reuters that a dovish signal from Warsh could weaken the dollar and trigger another rally in precious metals. The same logic applies to silver, especially after Monday's strong rebound.
Peace Deal Limits Downside
The US-Iran framework has also improved sentiment across commodities. The proposed reopening of the Strait of Hormuz has pushed oil lower, easing fears that energy costs will keep inflation elevated for longer. This has provided a cushion for silver, even as traders lock in gains. A lower oil price reduces pressure on central banks to tighten further, which is generally supportive for non-yielding assets.
Still, markets are not treating the deal as risk-free. Details remain limited, and investors are waiting to see whether shipping through Hormuz can return safely and predictably. Any setback in talks could revive demand for havens but also reignite inflation fears if crude prices jump again. For context on how geopolitical tensions have impacted silver recently, see our earlier coverage: Silver Drops Below $59 as Iran Tensions Eclipse Softer US CPI Data.
Technical Picture Stays Fragile
Silver's chart still points to caution. The metal remains below the Bollinger Bands' 20-day simple moving average and the 100-day simple moving average, keeping the broader bias tilted lower. The relative strength index is also below the midline, suggesting weak momentum rather than a clear bullish turn.
First resistance sits near $72.25. A move above that level could open the way to $74.14, followed by the 100-day SMA near $78.55 and the upper Bollinger band around $80.72. On the downside, $63.80 remains the main support area to watch. Until silver clears nearby resistance, rallies may continue to face selling pressure. For a broader perspective on how precious metals are reacting to shifting rate expectations, see our analysis on Chainlink Rebounds 5% as Bitcoin Rally Lifts Altcoin Sentiment: Key Levels to Watch.
Investors should also monitor how other assets are responding to the evolving macroeconomic landscape. For instance, Intuitive Surgical Tumbles 12% on 2026 Procedure Growth Forecast Despite Q2 Beat highlights how growth expectations can shift market sentiment, while UnitedHealth Jumps 6% on Q2 Beat, Raises 2026 EPS Forecast to $19.50-$20 shows the impact of strong earnings on stock performance.
This article is for informational purposes only and does not constitute financial advice.
