XAG/USD Pressured by Higher Rate Expectations

Summary:

Silver hovered near $55.50 on Friday and remained on track for a sharp weekly decline as rising interest rate expectations outweighed safe-haven demand despite escalating Middle East tensions.

Sell XAGUSD

EXP

Trading

55.300

ENTRY

42.000

TGT

64.000

55.942 +0.436 +0.79%

Point

Flat

42.000

TGT

CLOSING

55.300

ENTRY

64.000

Silver traded little changed around $55.50 on Friday but remained on course for a weekly loss of nearly 7%, as expectations for higher interest rates continued to outweigh safe-haven demand despite escalating geopolitical tensions in the Middle East.

The conflict between the United States and Iran intensified after reports that Tehran instructed Yemen's Houthi forces to prepare for the possible closure of the Red Sea shipping route if US strikes target Iranian energy infrastructure. Additional explosions reported across several Iranian cities have further heightened concerns over disruptions to global energy supplies, keeping oil prices well supported.

In my view, the surge in geopolitical tensions would normally provide stronger support for precious metals. However, the market is currently placing greater emphasis on the inflationary impact of higher energy prices and the likelihood that central banks, particularly the Federal Reserve, may need to keep monetary policy restrictive for longer.

Recent US economic data reinforced that narrative. Weekly jobless claims unexpectedly fell to 208,000, while the Philadelphia Fed Manufacturing Index climbed to its highest level since November 2021, underscoring the resilience of the US economy.

Federal Reserve officials also maintained a cautious tone. Dallas Fed President Lorie Logan said inflation progress remains insufficient, while Fed Vice Chair Philip Jefferson indicated further rate hikes remain possible if inflation fails to moderate. The combination of resilient economic data, rising oil prices and a hawkish Fed outlook continues to limit Silver's upside, leaving the metal under pressure despite persistent geopolitical uncertainty.

Technical Analysis

Silver remains firmly within a bearish market structure. On the 4-hour chart, price action continues to respect a well-defined descending trendline that has capped every recovery attempt since the mid-May peak. After briefly consolidating above the $56.00–$57.00 support zone earlier this month, sellers regained control, pushing prices back below the rising corrective trendline and exposing the metal to another wave of downside pressure. The recent rejection from the $59.00–$60.00 area confirms that bearish momentum remains intact and that rallies continue to attract fresh selling interest rather than sustained buying.

The $55.00 region now represents the immediate battleground for bulls. A decisive daily close beneath this level would signal a fresh breakdown from the recent consolidation pattern and likely accelerate losses toward the next major support around $49.00–$50.00, where buyers previously emerged. A sustained move below that zone would expose the $42.00 region, marking a much deeper extension of the prevailing downtrend and confirming that sellers remain firmly in control of the broader market structure.

On the upside, buyers need to reclaim $58.00 initially before shifting focus toward the more significant resistance around $62.00–$63.00, where horizontal resistance converges with the long-term descending trendline. Only a sustained break above this confluence would invalidate the current bearish outlook and suggest that a broader trend reversal is underway. Until then, upside recoveries are likely to remain corrective rather than the start of a new bullish trend.

Momentum indicators also continue to favor the bears. The Relative Strength Index (RSI) is likely hovering near the 40 mark, reflecting persistent negative momentum without yet reaching deeply oversold territory. This suggests there is still room for additional downside before selling becomes exhausted. Meanwhile, the Moving Average Convergence Divergence (MACD) is expected to remain below the zero line with widening bearish momentum, reinforcing expectations that rallies are likely to be sold into unless price can decisively reclaim key resistance levels.

TRADE RECOMMENDATION

SELL SILVER

ENTRY PRICE: 55.30

STOP LOSS: 64.00

TAKE PROFIT: 42.00

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

2753

Win Rate

63.48%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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