Silver Price Analysis: Fed Policy and Bond Yields Erode Safe-Haven Appeal
Silver prices (XAG/USD) dropped sharply to $29.60 in thin post-holiday trading, highlighting the impact of rising US Treasury yields and Federal Reserve policy expectations. Despite escalating geopolitical tensions in the Middle East, the white metal struggles to gain traction amid rising bond yields, which reduce the appeal of non-yielding assets like silver.
Geopolitical Tensions Fail to Boost Demand
On Thursday, Israel launched retaliatory strikes targeting the Iran-backed Houthis and bombed a Yemeni airport, intensifying tensions in the region. Prime Minister Benjamin Netanyahu’s remarks, “We are just getting started with them,” signal potential for further escalations. Historically, such conflicts boost demand for safe-haven assets. However, the silver market appears unfazed, with investors prioritizing economic indicators over geopolitical risks.
Economic Factors Weigh Heavily on Silver
The US Dollar Index (DXY) held steady above 108.00, while 10-year Treasury yields climbed to 4.61%. Elevated bond yields make silver a less attractive option for investors, given the higher opportunity costs. Market sentiment was further shaped by expectations that the Federal Reserve will implement fewer rate cuts in 2025, reflecting confidence in the US economy's resilience.
Technical Outlook for Silver
From a technical perspective, silver faces bearish pressure after breaking below the $30.00 trendline. The price hovers near the 200-day EMA, signaling uncertainty in the longer-term outlook. The 14-day RSI rebounded slightly to 40.00 but remains in bearish territory.
- Support Level: The September low of $27.75 acts as critical support, with further declines signaling deeper selling pressure.
- Resistance Level: On the upside, the 50-day EMA around $30.90 serves as a key barrier to any potential recovery.
Silver’s decline reflects a market grappling with higher bond yields and a stronger US Dollar, overshadowing geopolitical risks. While safe-haven demand may provide intermittent support, sustained recovery depends on easing economic headwinds and a potential reversal in Fed policy signals. Investors should monitor key support and resistance levels alongside broader market cues to gauge silver's next moves.