Silver (XAG/USD) experienced a sharp decline for the second consecutive day on Friday, trading at $74.65 after hitting a 10-day low of $73.95, and is on track for a nearly 7% weekly loss [1]. This drop is attributed to the strengthening US Dollar, which has benefited from investor risk aversion amid ongoing uncertainty in the Middle East and a lack of progress in the US-Iran peace process [1][2][3]. The US Dollar Index registered gains for the third straight day and held steady at around 98.80 during the European session on Friday [2].
Geopolitical tensions remain elevated as the ceasefire between Israel and Lebanon was extended by three weeks following talks at the White House, according to President Donald Trump [2][3]. However, optimism for a broader resolution to the Iran conflict has faded, with Trump stating he does not want to rush a final agreement and refusing to set a timetable for ending the war [2][3]. Additionally, Trump ordered the US military to 'shoot and kill' any Iranian vessels laying mines in the Strait of Hormuz, further straining US-Iran relations [2]. These developments have kept investors cautious, supporting the US Dollar and pressuring precious metals like silver [1][2][3].
Technical analysis indicates that XAG/USD broke below the bottom of its upward-trending channel from late March, with sellers taking control after a bearish move from the $78.50 support area [1]. The price is currently finding some support at the 38.2% Fibonacci retracement of April's rally near $74.60, with further downside targets between $72.61 and just above $72.00, while resistance is expected at $75.60 and $78.60 [1]. The Relative Strength Index (RSI) is nearing oversold territory, and the MACD remains negative, reinforcing the bearish outlook [1].
Market reactions have been notable: Wall Street's main indexes closed in negative territory on Thursday, and European markets opened lower on Friday as the initial optimism from the ceasefire extension faded [2][3]. U.S. Treasury yields were little changed, reflecting muted investor sentiment and ongoing caution regarding Middle East developments [3]. Meanwhile, U.S. business activity showed resilience, with the S&P Global Composite PMI rising to 52 in April's preliminary estimate from 50.3 in March [2].
Looking ahead, investors are closely monitoring headlines from the Middle East and awaiting the University of Michigan's final April Consumer Sentiment Index reading, which could further influence market direction [2][3].
CONCLUSION
Silver prices have come under significant pressure due to a stronger US Dollar and persistent geopolitical uncertainty in the Middle East, with technical indicators suggesting further downside risk. Market sentiment remains cautious, as hopes for a swift resolution to the Iran conflict have diminished and risk-off flows continue to dominate. Investors are expected to remain focused on geopolitical developments and upcoming economic data for further direction.