In Tuesday’s European session, the price of silver (XAG/USD) experienced a sharp decline, plummeting to $28.40, as it faced significant selling pressure. The surge in the US Dollar (USD) to a more than five-month high around 106.40 exacerbated the downward pressure on the white metal. The USD strengthened following the release of robust United States Retail Sales data for March, heightening uncertainty regarding the Federal Reserve’s (Fed) timeline for interest rate reductions.
Market sentiment, as reflected by S&P 500 futures, also witnessed losses during the European session, signaling a decline in risk appetite among investors. Meanwhile, 10-year US Treasury yields hovered near a fresh five-month high around 4.63%, with expectations mounting that the Fed will delay rate cuts later this year. The US Dollar Index (DXY) continued its upward trajectory, reaching 106.33 and extending its winning streak for the fifth consecutive trading session on Tuesday.
Fed policymakers have emphasized a lack of urgency for interest rate reductions, with San Francisco Fed Bank President Mary Daly advocating for a restrictive monetary policy until inflation trends towards the 2% target.
Despite the near-term downward pressure on silver, the outlook for the white metal remains strong amidst concerns that tensions in the Middle East could escalate beyond Gaza. Following a cabinet meeting on Monday with Israel Prime Minister Benjamin Netanyahu, Israel’s military Chief of Staff Herzi Halev reaffirmed their intention to respond to Iran’s attack on their territory. Iran’s retaliatory strike, which involved hundreds of drones and missiles, followed Israel’s attack on the Iranian embassy in Syria near Damascus over the weekend, resulting in casualties including two high-ranking generals.
As geopolitical tensions persist, silver is likely to remain volatile in the near term, with investors closely monitoring developments in the Middle East for potential market impacts. The interplay between USD dynamics, geopolitical tensions, and monetary policy decisions will continue to shape the trajectory of the silver price in the coming days.
