Silver (XAG/USD) declined by 0.7% to near $75.20 during early European trading on Thursday, after failing to extend its recovery above $76.60 earlier in the day [1]. The drop in silver prices coincided with a rebound in US Treasury yields, with the 10-year yield rising 0.3% to approximately 4.6%, though still below the multi-year high of 4.69% reached on Tuesday [1]. The rebound in yields followed a correction triggered by comments from US President Donald Trump, who stated that Washington is in the 'final stages' of finalizing a deal with Iran [1].
Previously, US Treasury yields had been rallying as traders increased bets on further Federal Reserve interest rate hikes this year, driven by elevated oil prices amid the Strait of Hormuz closure [1]. According to the CME FedWatch tool, the probability of the Fed delivering at least one interest rate hike this year stands at 51%, a significant shift from earlier expectations of two rate cuts before the onset of the Middle East war [1]. Higher yields on interest-bearing assets typically reduce the appeal of non-yielding assets like silver [1]. The outlook for US bond yields is expected to remain bullish unless US inflation shows signs of cooling [1].
From a technical perspective, XAG/USD is trading below the 20-day Exponential Moving Average (EMA) at $77.84 and beneath the upward-sloping border of the Ascending Triangle formation, now acting as resistance around $78.31 [1]. The loss of this trend support suggests a corrective phase within the broader advance, with the Relative Strength Index (14) near 46, indicating ongoing downside pressure but not yet oversold conditions [1]. Initial resistance is at the 20-day EMA ($77.84), followed by the May 15 high at $83.88 [1]. On the downside, if silver fails to reclaim the Triangle's border, prices could slide toward $70, with a further drop below $70 exposing the March 26 low at $66.71 [1].
CONCLUSION
Silver prices are under pressure as US Treasury yields rebound, shifting market expectations toward potential Fed rate hikes. Technical indicators suggest further downside risk unless silver can recover key resistance levels. The market remains cautious, with the outlook for silver closely tied to US inflation and bond yield trends.