Spot silver (XAG/USD) is under pressure during Friday's Asian trading session, falling nearly 1% to around $58.40. The weakness in silver is primarily driven by a short-term rebound in the U.S. dollar, with the dollar index ending a three-day losing streak to regain some buying support. As of now, the U.S. Dollar Index (DXY) is up about 0.23%, trading near 100.20. Since silver is priced in dollars, a stronger greenback typically reduces the appeal of precious metals for non-dollar investors, putting short-term pressure on the white metal.
However, the downside for silver remains limited by expectations surrounding Federal Reserve policy. The Fed held interest rates steady at its latest meeting and emphasized that future policy will rely less on forward guidance and more on incoming economic data. This shift in communication has led the market to reassess the dollar's outlook. The earlier sharp decline in the dollar was largely due to reduced bets on a near-term rate hike by the Fed, while Fed Chair Kevin Warsh failed to fully convince the market with his hawkish inflation stance. According to market surveys, some institutions believe the market is scaling back remaining expectations for a July rate hike, and investors are refocusing on whether the Fed will face policy pressure between growth and inflation control. The uncertainty surrounding the dollar's trajectory provides underlying support for silver. If the market continues to lower expectations for further tightening, U.S. real yields could come under pressure, enhancing the appeal of non-yielding assets like silver.
Nevertheless, risks in the energy market continue to cap silver's upside. With tensions between the U.S. and Iran affecting global energy supply expectations, crude oil prices remain volatile at elevated levels. Rising oil prices could reignite global inflation expectations, potentially forcing major central banks to maintain higher interest rates. For silver, while a high-inflation environment can boost demand for precious metals as a safe haven, if the market perceives that central banks will keep policy tight for longer to control prices, it increases the opportunity cost of holding non-yielding assets, putting pressure on silver prices. Additionally, silver has dual properties as both a precious and industrial metal, meaning its price is influenced not only by the dollar and interest rates but also by changes in global manufacturing demand. If economic growth expectations improve, a recovery in industrial demand could further strengthen support for silver.
Market focus is currently on the direction of the dollar index, future Fed policy signals, U.S. economic data, and changes in the energy market. If the dollar continues to rebound, silver may prolong its short-term correction; if the dollar weakens again, silver could regain upward momentum. On the daily chart, silver maintains a short-term bearish structure, trading below the 20-day exponential moving average (EMA) of $58.91, indicating that recent bounces are still corrective. The RSI indicator is near 46, in neutral territory, suggesting selling pressure exists but has not yet reached oversold levels. Immediate resistance is at the 20-day EMA near $58.91; if the daily close can reclaim this level, it would alleviate short-term bearish pressure and could push prices to test resistance near $60.94. Key support is at the July 28 low of $56.64, followed by the July 17 low of $54.77. A break below these support levels could confirm the short-term correction trend.
On the 4-hour chart, XAG/USD is in a choppy correction phase, with insufficient bounce momentum and dollar strength weighing on bulls. Short-term moving averages still pose resistance, and the market awaits new fundamental catalysts. If silver breaks above the $59.00 area, it could test the $60.00 level on the upside; if it continues to face resistance and breaks below $56.60 support, it could fall further to find buying support near $55.00. The 4-hour chart currently shows a slight advantage for bears, but changes in the dollar's direction could quickly alter market dynamics.
Silver's recent moves are shaped by the interplay of the dollar, Fed policy expectations, and energy market risks. A short-term dollar rebound is pressuring silver, but the Fed's reduced guidance and lower rate hike expectations offer potential for a rebound. The biggest uncertainty remains the balance between inflation and interest rates. If crude oil prices rise further due to supply risks, inflation expectations could heat up, limiting precious metals' upside; however, if U.S. economic data continues to weaken, signaling a more dovish Fed, silver could attract fresh inflows. In the near term, the $58.90 area is a key level for silver to regain strength, while $56.60 is a critical defense zone. Investors should closely monitor the dollar index, Fed policy signals, and global energy supply changes to determine silver's next direction.
Comments