Silver: between geopolitics and the Fed

XAG/USD

Key zone: 58.00 - 62.00

Buy: 63.50 (on a pullback following a retest of 60.00); target 67.50-71.50; StopLoss 62.80

Sell: 57.50 (on strong negative fundamentals); target 53.50; StopLoss 58.20

Investors are once again turning their attention to silver. After the record volatility seen at the beginning of the year, silver has gradually been regaining ground. Buyers have become more active again amid expectations that the Federal Reserve will begin easing monetary policy, although the market remains extremely sensitive to geopolitical risks.

Unlike gold, silver stands at the intersection of two worlds: it serves both as a safe-haven asset and as one of the world's most important industrial metals. As a result, its price movements are often considerably sharper. Traders are entering a period in which a single headline can completely change market sentiment within just a few hours.

• Recent macroeconomic data have strengthened expectations that the U.S. economy is gradually cooling, increasing the likelihood that the Federal Reserve could shift toward a more accommodative monetary policy sooner than previously expected.
• This has traditionally created a favorable environment for silver. Lower interest rates reduce the attractiveness of government bonds and weaken the U.S. dollar, allowing precious metals to attract additional capital inflows. If U.S. Treasury yields continue to decline, XAG/USD could maintain its upward momentum.
• However, any signs of accelerating inflation or unexpectedly strong U.S. economic data could quickly revive expectations that the Federal Reserve will maintain a restrictive monetary policy. In that case, the dollar would strengthen, while pressure on silver would increase significantly.

Unlike gold, the value of silver is determined not only by investment demand.

Nearly half of global silver consumption comes from industry. Silver remains an indispensable material in the production of solar panels, microelectronics, semiconductors, medical equipment, electric vehicles, and artificial intelligence infrastructure. The rapid expansion of data centers and next-generation power systems is only reinforcing this trend. Against the backdrop of an ongoing physical supply deficit, the long-term fundamental outlook remains constructive.

Over the past several months, developments in the Middle East have become one of the key drivers of volatility not only for oil but also for precious metals.

Any escalation involving Iran, Israel, and the United States almost immediately increases demand for safe-haven assets. Investors begin looking for instruments capable of preserving capital during periods of uncertainty, making silver one of the first beneficiaries of such a scenario. This creates a rather unusual situation in which two opposing forces operate simultaneously.

• Geopolitical tensions increase demand for precious metals as instruments for capital preservation.
• Rising oil prices could once again accelerate inflation and force the Federal Reserve to maintain a more restrictive monetary policy, supporting the U.S. dollar while limiting silver's upside potential.

For this reason, XAG/USD often reacts to developments in the Middle East in a much more complex manner than gold.

Another important consideration is the possibility that the conflict could spread to neighboring countries and draw in the world's major powers. While market participants do not currently view this as the base-case scenario, the risk itself remains significant enough to sustain an elevated geopolitical risk premium.

This is particularly important for silver.

• If trade restrictions continue to intensify, global industry could face another slowdown, negatively affecting demand for industrial metals.
• At the same time, increasing global uncertainty could boost investment demand for silver as a safe-haven asset.

As a result, XAG/USD is effectively caught between two opposing capital flows.

What does this mean?

Following its June correction, silver is gradually stabilizing.

The nearest resistance zone is located between $62.30 and $63.70, where sellers have previously become active. A decisive breakout above this range could pave the way toward $65.30 and eventually the psychologically significant $70 level.

Key support levels are located around $59.50 and $57.60. A break below these levels would indicate that selling pressure is strengthening once again and that the market could enter a deeper correction.

So we act wisely and avoid unnecessary risks.

Profits to y’all!