Spot silver traded higher on Thursday, June 18th, gaining over 1.5% to around $69.10. During the Asian session, the metal attracted significant short-term buying interest, with its price strengthening. The primary driver was a major easing of tensions in the Middle East.
The US-Iran peace agreement has boosted demand while easing energy inflation concerns. According to reports from Iran on June 18th, US President Trump and Iranian President Masoud Pezeshkian signed a memorandum of understanding via electronic means. The core goal of the agreement is to completely end the long-standing hostile conflict between the two nations and restore normal navigation through the Strait of Hormuz.
Pakistani Prime Minister Shehbaz Sharif confirmed externally that the memorandum took effect immediately upon signing. This significantly alleviated market concerns about potential disruptions to Middle Eastern energy supplies.
This breakthrough diplomatic development directly triggered a rapid decline in international crude oil prices. The risk premium accumulated in oil prices due to previous geopolitical conflicts was largely unwound. Market panic over energy persistently driving higher inflation notably cooled, leading to a reduction in bets that the Federal Reserve would continue tightening monetary policy.
The value of holding non-yielding precious metals increased, coupled with a weakening US dollar as safe-haven dollar longs took profits. These two favorable factors jointly boosted demand for silver. However, hawkish signals from the Federal Reserve, which have essentially extinguished expectations for rate cuts this year, have somewhat limited the upside for silver prices, resulting in a relatively moderate rally.
The Fed Stands Pat But Keeps Rate Hike Option, Potentially Capping Silver's Upside
As expected, the Federal Reserve kept its benchmark interest rate unchanged during its June policy meeting on Wednesday. However, it overall delivered a hawkish policy signal, explicitly stating the possibility of further rate hikes within the year. This completely reversed the market's previous easing expectations and has become a core macro headwind constraining the rebound in precious metals.
Silver, as a typical non-yielding asset, does not generate interest, dividends, or other fixed income. Its investment returns rely entirely on price fluctuations, making its valuation highly sensitive to market interest rates and US Treasury yields.
In an environment where the Fed is tightening monetary policy and maintaining high interest rates, the returns on interest-bearing assets like US Treasuries and US dollar deposits remain elevated. This significantly increases the opportunity cost of holding silver, leading to a sustained weakening in the willingness to allocate funds to silver.
Even though silver possesses inflation-hedging properties, under the pressure of high interest rates, its safe-haven and inflation-hedging premiums are continuously diluted.
The current hawkish policy stance of the Federal Reserve has reshaped the short-term pricing logic for commodities and precious metals, effectively countering the bullish support brought by geopolitical easing.
The earlier US-Iran reconciliation, which pushed oil prices lower and cooled inflation fears, combined with a short-term US dollar pullback, provided silver with a temporary rebound impetus. However, the Fed's indication of no rate cuts this year and the potential for further hikes have raised the market's real interest rate anchor, effectively capping silver's upside potential.
Under this macro landscape, silver is unlikely to stage a one-sided rally. Bullish momentum lacks sustainability, and the rebound on the charts is more of a technical correction.
From a medium to long-term perspective, the Fed's hawkish bias will continue to suppress silver's upside, becoming a core resistance for any subsequent breakout. The price action will most likely maintain a structurally weak, range-bound pattern.
Institutional Perspectives
UBS believes the rebound in silver prices during the Asian session was driven by a single factor and has weak sustainability. This silver price increase primarily relied on short-term sentiment repair due to the easing of US-Iran geopolitical tensions, representing an event-driven, impulsive move. It lacks the fundamental and macro support for a trend-based upward move.
The Fed's June policy meeting delivered clearly hawkish signals. Market expectations for a rate cut this year have essentially vanished completely, with half of the policy officials supporting another hike within the year. The expectation of prolonged high interest rates further pushes US Treasury yields to operate at elevated levels. As a non-yielding asset, silver faces a persistently high holding opportunity cost, continuously suppressing overall bullish valuations. This has become the core macro pressure limiting silver's upside at this stage.
The supply-demand front also lacks supportive factors. The ongoing process of silver reduction in the photovoltaic industry is significantly dragging on the incremental industrial demand for silver. Meanwhile, the high-price environment stimulates a continuous increase in recycled silver supply, notably narrowing the original supply-demand deficit and marginally weakening the physical market's support.
Overall, silver faces ample resistance above, making a breakout from the current range difficult in the short term. The institution advises cautious positioning on rallies, identifying the $70 level as a key strong resistance. The overall price center for silver in the third quarter is expected to remain stable, making a one-sided trend unlikely.
HSBC believes the market has solid bottom support, but the rebound space will be strictly limited by multiple factors. The institution acknowledges data from the World Silver Council, indicating the global silver market has maintained a supply-demand deficit for six consecutive years. This long-term physical deficit builds a solid bottom for silver prices, with limited downside below $68 and a low risk of a deep correction.
However, the current macro environment significantly constrains silver's upside elasticity. The prolonged high-interest-rate cycle from the Federal Reserve continues to pressure the valuation of non-yielding precious metals. Coupled with a sharp decline in silver demand from the photovoltaic sector—a reduction in industrial demand that cannot be offset by demand from other areas—the overall fundamental picture for industrial silver use continues to weaken. The US-Iran reconciliation, which pushed oil prices lower and cooled energy inflation expectations, can only provide a brief sentiment boost for silver. It cannot overturn the pricing logic dominated by monetary policy.
HSBC points out that the current geopolitical-driven rebound is a technical correction, not a signal of a trend reversal. It is highly likely to face profit-taking pressure after a rally. The institution forecasts the core trading range for silver prices this year to be between $68 and $88. In the short term, price action will mainly involve range-bound fluctuations, making chasing the rally less attractive. It is more prudent to patiently wait for a turning point in fundamentals and macro expectations.
From a daily chart perspective, spot silver has been in a corrective rebound from the recent low of $61.48. The current price has rebounded to below the MA20 and MA50 moving averages. The long-term MA200 moving average is positioned around $68.79, almost coinciding with the current price, forming a short-term line in the sand between bulls and bears. The key resistance zone above lies at the MA50 ($75.13) and the previous high of $89.34. Strong support below is anchored at the prior lows of $60.96 and $61.48, forming the medium-term bottom zone.
On the indicator front, the MACD lines are operating below the zero line. The DIFF line is slightly approaching the DEA line, and the green histogram has narrowed significantly, indicating a substantial decay in bearish momentum. However, a golden cross bullish signal has not yet formed. The RSI reading is 43.53, residing in a neutral-to-weak zone without overbought or oversold conditions, suggesting the market lacks clear one-sided momentum.
In terms of price structure, following the sustained decline from the high of $89.34, the price has successively broken below short-term moving averages, placing it in a low-level recovery phase after the drop. The current price is under pressure from the 20-day moving average, showing weak rebound strength and only finding fragile support from the MA200. If it can stabilize above $69, there is a chance to test the resistance near $75. If it loses the MA200 support, it will likely test the lows around $61 again. The overall technical posture remains weak. In the short term, low-level consolidation is expected, with the sustainability of the rebound in question and no clear reversal signal yet in sight.
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