Silver (XAG/USD) continues to command the market’s attention as it holds firm near 13-year highs, currently trading around $36.70. This price action comes amid rising tariff tensions, with safe-haven demand for precious metals gaining renewed momentum.
However, despite geopolitical catalysts, XAG/USD remains trapped within a tight four-week consolidation range, signaling market indecision and waiting for a clear breakout trigger. Gradiopexo lays out a clear, concise explanation of this issue in their recent article.
Tariff Headlines Fuel Safe-Haven Demand
At the center of the current macroeconomic narrative is the US President’s announcement of 25% tariff levies on 14 nations, including major trading partners such as Japan and South Korea. These tariffs have reignited global trade war concerns, triggering risk-off sentiment in equity markets and boosting precious metals, especially silver, due to their dual role as an industrial metal and safe-haven asset.
Adding to market uncertainty, the US President signed an executive order extending the reciprocal tariff negotiation deadline from July 9 to August 1, offering more time for diplomacy but simultaneously prolonging economic ambiguity. Such uncertainty tends to benefit non-yielding assets like silver, especially when inflation and real yields remain in focus.
Silver’s Range-Bound Behavior Reflects Cautious Optimism
Despite bullish macro undercurrents, XAG/USD has been oscillating within a narrow trading band of $35.50 to $37.30 over the past month. This technical stasis mirrors the market’s hesitation to commit to a breakout or breakdown. The 20-day Simple Moving Average (SMA), currently located at $36.42, has emerged as a dynamic support level, reinforcing the underlying bullish bias.
This moving average also coincides with the Bollinger Bands’ middle line, reinforcing its technical importance. Silver prices have consistently closed above this level, maintaining a favorable posture, although upside progress remains restrained.
The upper boundary of the Bollinger Bands aligns with $37.30, making it a crucial resistance level that bulls must overcome to resume the uptrend.
Technical Indicators Suggest Limited but Positive Momentum
A deeper look into momentum indicators reveals a cautiously constructive technical landscape. The Relative Strength Index (RSI) stands near 60, suggesting moderate buying interest without indicating overbought conditions. This leaves room for additional upside while reflecting the ongoing tug-of-war between bulls and bears.
Meanwhile, the Rate of Change (ROC) sits at +1.21, indicating mild upward momentum. Though this does not suggest an explosive move is imminent, it underscores a gradual accumulation phase, which is often a precursor to stronger price advances when aligned with fundamental drivers.
The narrowing of the Bollinger Bands is another technical feature to watch. As volatility compresses, the probability of a volatility breakout increases. However, given the lack of a clear macro catalyst, such as a Fed rate cut or a trade resolution, silver may continue to hover in consolidation before making its next significant move.
Upside and Downside Scenarios
A sustained daily close above $37.30 would signal a bullish breakout from the month-long range, likely triggering technical buying. In this scenario, the next upside targets lie at $38.00, followed by $39.00, which would represent the highest levels for silver since 2011.
This would align with a broader precious metals rally, especially if tariff tensions escalate or central banks pivot toward easing monetary policies.
On the flip side, a break below $36.42 would mark the first sign of technical weakness. In that case, silver may drift toward the lower Bollinger Band near $35.72, which aligns with the bottom of the recent consolidation zone. A decisive drop below this level would expose the next support area around $34.50, opening the door for a deeper corrective pullback.
Broader Market Influences: Fed Policy and the US Dollar
Aside from tariffs, one of the key headwinds for silver is the outlook on US Federal Reserve monetary policy. The stronger-than-expected US employment report last week dented hopes for an imminent interest rate cut, helping to keep the US Dollar (USD) firm. A strong dollar typically acts as a headwind for silver, as it makes dollar-denominated commodities more expensive for foreign investors.
Currently, Fed Funds Futures suggest a delayed easing cycle, with traders pushing expectations for the first rate cut into Q4 2025. This monetary backdrop tempers some of the bullish fervor for silver, especially in the absence of new inflationary shocks or major geopolitical escalations.
Conclusion: A Wait-and-Watch Phase with Breakout Potential
The XAG/USD pair is at a critical technical juncture, consolidating near multi-year highs while digesting a complex mix of geopolitical, technical, and monetary policy drivers. As long as tariff tensions remain unresolved and Fed policy stays on hold, silver prices are likely to trade sideways, albeit with a bullish undertone.
In the short term, the market appears poised for a volatility breakout, with direction hinging on upcoming developments in trade negotiations, US macroeconomic data, and central bank signals. Traders should remain attentive to any shift in momentum as silver teeters on the edge of a larger directional move.
