Silver Extends Decline as Oil Market Uncertainty and Technical Weakness Weigh on Prices

Silver prices continued to weaken during Tuesday's European session, with XAG/USD trading near US$58.60, down almost 1% on the day. Investors remained focused on developments in the Middle East after renewed military activity near the Strait of Hormuz increased uncertainty in energy markets.

Unlike gold, which is often viewed primarily as a safe-haven asset, silver is influenced by both investment demand and industrial consumption. As a result, higher energy prices can affect silver through rising manufacturing costs and weaker demand from industries such as electronics, solar energy and automotive production, all of which are significant consumers of the metal.

Recent geopolitical tensions have also supported expectations that inflation could remain elevated if energy prices increase. Such expectations may influence the outlook for monetary policy and the US Dollar, both of which are important factors affecting silver prices.

According to media reports, Iranian Foreign Minister Abbas Araghchi stated that Iran continues to regard the Strait of Hormuz as an area under its sovereign authority while diplomatic discussions are expected to continue. Although efforts to reduce tensions are underway, uncertainty surrounding future shipping conditions has kept investors cautious across commodity markets.

Technical indicators also suggest that market sentiment remains weak. XAG/USD is trading below its 20-day Exponential Moving Average (EMA) of US$65.37, indicating that the broader downward trend remains in place. Meanwhile, the 14-day Relative Strength Index (RSI) stands at 31.85, close to the commonly watched oversold level of 30. While this may indicate that selling momentum is slowing, the RSI alone does not confirm a trend reversal.

On the upside, the first resistance level is located near US$61.01, followed by the 20-day EMA around US$65.37. On the downside, continued selling pressure could bring attention to the US$55.63 support area.

What to Watch

Middle East diplomatic developments (Tuesday)

Investors will monitor discussions related to shipping through the Strait of Hormuz. Any renewed geopolitical tensions could influence energy markets and broader commodity sentiment.

US Nonfarm Payrolls (Thursday)

The US employment report will provide additional insight into the outlook for the Federal Reserve's monetary policy. Market participants will assess whether the data changes expectations for future interest-rate decisions.

Technical indicators

Traders will continue monitoring the RSI and price action to determine whether market momentum begins to stabilize or whether the broader downtrend remains intact.

Oil price movements

Energy prices remain an important factor for silver because of their impact on industrial production costs and inflation expectations. Continued volatility in crude oil markets may influence silver price movements in the near term.

Source: Al Jazeera, Bloomberg survey, CME FedWatch, FXStreet Technical Analysis.