Silver drops as Federal Reserve holds rates steady amid Middle East conflict

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Silver slides 8.18% to $69.70 today

Highlights

Intensifying Middle East conflict has driven up oil prices and inflation fears, prompting the Fed to maintain a hawkish policy stance and heightening commodity market volatility.
A U.S. trade investigation into Mexico threatens tariffs on its annual 200 million ounces of silver exports, compounding output cuts of 9–11% from major Mexican miners and deepening a persistent global supply deficit.
Silver trades below key short-term technical levels with strong bearish momentum, high volatility, and a likely consolidation within the $66.00–$74.00 range unless major support breaks.

Rising geo-economic risks as Middle East conflict, trade threats fuel volatility

Escalating geopolitical conflict in the Middle East, including active hostilities between Israel, the United States, and Iran, has introduced acute volatility and inflation risks, with direct threats to energy markets intensifying since Iranian security chief Ali Larijani was killed in an Israeli airstrike and the Iranian military pledged forceful retaliation. The Federal Reserve has maintained a hawkish stance, keeping interest rates steady on Wednesday in direct response to persistent inflationary pressures and instability stemming from the Iran war and surging oil prices, constraining liquidity for non-yielding assets. The U.S. initiated a Section 301 investigation targeting Mexican trade policy, which, if escalated, sets a formal mechanism for instituting tariffs on approximately 200 million ounces of annual silver exports from Mexico, the world's largest producer, with the public comment period closing April 15. Mexican mining companies, such as Fresnillo PLC and First Majestic Silver, have revised down production guidance by 9-11%, compounding a six-year global supply deficit and increasing supply-side uncertainty. The volatile macro environment, characterized by stagnating U.S. labor markets, rising energy costs, and the threat of trade disruptions, has sharply increased near-term geo-economic risks for silver.

Bearish momentum intensifies with oscillators and price gap confirming weakness

Momentum signals for XAG remain bearish, with MACD and ADX confirming a strengthening downside trend. RSI is at 36.37, with daily Stoch RSI and CCI both in oversold territory (CCI D1: -148.72), and BBP at -2.98, demonstrating firm seller dominance intraday. The Awesome Oscillator supports ongoing bearish momentum. Price action showed a sharp gap down at the open ($78.03 vs previous close $75.91), ending the session near the low ($70.12–$78.03), with high volatility and no sign of stabilization; technical signals from both momentum and oscillators reinforce pronounced bearish dynamics.

Range-bound outlook as weak momentum deters bullish reversal

In the short term, XAG is projected to trade within a 5-day volatility band of $66.00 – $74.00. The probability of a price increase is low (less than 20%), as only the weekly MACD favors buying while daily momentum is strongly negative. The baseline scenario anticipates consolidation within the $66.00 – $74.00 range, with a bullish reversal requiring a strong move above $74.00 toward resistance at $86.35. Failure of support at $66.00 would likely lead to further declines, potentially approaching the MA-200 level near $64.75.

Viktoras Karapetjanc, analyst at Traders Union, sees silver facing strong selling in the short and medium term, but believes the long-term uptrend is still intact. He notes that global macro and geopolitical risks — including heightened Middle East tensions, Fed policy, and possible Mexican export tariffs — support elevated volatility and uncertainty for silver. Karapetjanc highlights that technical momentum remains negative while supply-side fundamentals are growing more supportive as global deficits persist. He maintains a constructive outlook if support near $66.00 holds, viewing consolidation as a base for the next move. "If silver can stabilize above $66.00 despite negative momentum, shifting macro and supply dynamics could fuel a bullish reversal in the coming weeks."

Previously it was reported that silver faced persistent short- and medium-term selling pressure, driven by oversold technical conditions and elevated downside risks. The current analysis not only reinforces this bearish outlook amid heightened geopolitical and supply uncertainties, but also urges traders to closely monitor the $66.00 support, as a decisive break below this level could trigger further accelerated declines.

Source of Data: XAG Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

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