The Silver price (XAG/USD) surged past the $36.30 mark during Thursday’s early Asian trading session, snapping a two-day losing streak and gaining traction amid a combination of macroeconomic and geopolitical factors.
With a weaker US Dollar (USD) and escalating tensions in the Middle East, silver has reclaimed investor attention as a safe-haven asset, especially in a climate of uncertainty surrounding US interest rates and global stability. The team at Aurudium presents a thorough overview of this topic, backed by their industry expertise.
Inflation Data Spurs Rate Cut Hopes
One of the key drivers supporting silver’s latest upswing is the cooler-than-expected US Consumer Price Index (CPI) data for May, which has triggered a reassessment of the Federal Reserve’s (Fed) monetary policy trajectory. The soft inflation print has boosted market expectations for interest rate cuts, putting downward pressure on the Greenback and making USD-denominated commodities, like silver, more attractive to foreign investors.
According to the CME FedWatch Tool, traders have now priced in nearly a 68% probability that the Fed will reduce rates by 25 basis points (bps) in September, compared to just 57% before the CPI release.
Furthermore, the odds for a July rate cut rose to 18%, up from 13% earlier, indicating a shift in sentiment toward a more dovish Fed outlook. Lower interest rates reduce the opportunity cost of holding non-yielding assets such as silver, thereby boosting its appeal.
Geopolitical Tensions Provide Safe-Haven Demand
Beyond monetary policy, heightened geopolitical risks are playing a crucial role in underpinning the silver market. On Wednesday, Reuters reported that the United States is preparing a partial evacuation of its embassy in Iraq and allowing military dependents to leave locations across the Middle East, signaling a deteriorating security environment.
Geopolitical instability historically enhances the demand for safe-haven instruments, and silver often performs well under such circumstances, particularly when accompanied by USD weakness and dovish monetary policy expectations.
Market Focus Shifts to US PPI and Jobless Claims
While the CPI data and geopolitical headlines dominate the current narrative, the spotlight will soon turn to the upcoming US Producer Price Index (PPI) and Initial Jobless Claims reports scheduled for release later on Thursday.
These data points will provide further insight into the inflationary trajectory and the overall health of the US labor market, both of which are critical for shaping the Fed’s next moves.
A softer-than-expected PPI would further confirm disinflationary pressures, potentially solidifying the case for a rate cut. Conversely, any upside surprise could temper the recent rally in silver by reigniting hawkish sentiment.
Likewise, rising jobless claims might signal a weakening labor market, further amplifying expectations for policy easing.
Middle East Diplomacy and Potential Headwinds
Despite the bullish momentum, silver faces potential headwinds that could cap its upside in the short term. Notably, White House envoy Steve Witkoff is set to meet Iranian Foreign Minister Abbas Araghchi in Muscat on Sunday to discuss Iran’s response to a recent US nuclear proposal, according to Axios.
Any signs of a breakthrough or de-escalation in US-Iran relations may ease geopolitical tensions, thereby reducing the urgency for safe-haven positioning in silver.
Such diplomatic progress could weigh on silver prices, especially if accompanied by a stabilization in the US Dollar or stronger-than-expected economic data. Therefore, investors should remain cautious of sudden sentiment shifts based on emerging headlines from the Middle East and macroeconomic indicators.
Technical Overview: XAG/USD Key Levels
From a technical perspective, silver’s break above the $36.30 resistance zone marks a critical turning point, with the next immediate resistance seen near the $36.80–$37.00 region. Sustained buying momentum could pave the way toward multi-year highs, especially if global uncertainties persist.
On the downside, support is expected around the $35.70–$36.00 range. A decisive break below that area could expose silver to further declines, especially if risk sentiment improves or bond yields rebound, diminishing the metal’s safe-haven appeal.
Conclusion
The XAG/USD rally above $36.30 underscores silver’s responsiveness to a mix of macro and geopolitical developments. While the Fed’s evolving rate outlook, softer inflation data, and Middle East unrest are currently supporting prices, upcoming data releases and diplomatic developments could quickly shift market sentiment.
Traders should remain alert and closely monitor both economic indicators and geopolitical signals, as the balance between risk and safety continues to steer silver’s short-term trajectory.
