Silver prices are dropping due to a stronger US Dollar and rising yields, which affect commodities priced in Dollars. The XAG/USD pair is close to a key support level of $36.00, with losses of about 1.60% today. This decline in silver can be attributed to the US Dollar’s recovery and updates on global trade talks. President Trump’s positive comments about trade negotiations have lessened the demand for safe-haven assets such as silver. Germany’s industrial production data for May showed a yearly increase of 1% and a monthly rise of 1.2%, indicating a stable economy. Additionally, China’s foreign exchange reserves for June slightly surpassed expectations, which supports economic stability.

Federal Reserve Policy Shift

The Federal Reserve’s change in policy, prompted by strong US Nonfarm Payrolls data, has reduced the appetite for safe-haven investments. Silver’s price has dropped from around $37.00. If it falls below $36.00, it might reach deeper support levels, like the 23.6% Fibonacci extension at $35.12 and the 50-day SMA at $34.54. Silver acts as a store of value and a medium of exchange, affected by geopolitical events and the US Dollar. Its price is also influenced by industrial demand and movements in Gold. Currently, silver is weak as the US Dollar strengthens and global bond yields, particularly those linked to US Treasuries, rebound. As the Dollar increases in purchasing power, the prices of Dollar-denominated commodities tend to drop, requiring fewer Dollars to purchase the same amount of silver. This pressure on silver is coupled with encouraging macroeconomic signals, making its downward trend clearer.

Market Sentiment Shifts

Trump’s comments on improving trade talks have boosted riskier assets but hurt silver. When market anxiety reduces, safe-haven assets like silver often lose their appeal. There’s less need for protection when the situation seems to be stabilizing. In Europe, German industrial production was stronger than expected, with a monthly increase of 1.2% following mixed economic data in recent months. This rise indicates a more robust industrial performance and eases concerns about stagnation in Germany’s economy. Similarly, China’s foreign exchange reserves showing a slight increase adds reassurance for policy stability, reducing the urgency to seek safety in metals. The US labor market appears overheated. High payroll numbers have led the Federal Reserve to consider a more hawkish stance, suggesting fewer or no immediate rate cuts. This scenario supports the Dollar and raises real yields, which act as headwinds for non-yielding assets. Looking at the charts, the drop from the $37.00 level stands out, making the $36.00 mark a psychological pivot. If it breaks, signals indicate a potential shift to the Fibonacci extension support at $35.12. This level, near the 50-day simple moving average, might see increased trading activity from those looking to re-enter the market as momentum weakens. Practically speaking, any short-term decisions should pay closer attention to intraday US data, especially regarding employment and inflation. Unpredictable outcomes can trigger sharp market movements. Trend-following strategies in silver futures and options may perform best when combined with tighter stop-loss levels and clear profit targets. Expect volatility to rise unexpectedly, particularly during central bank announcements or out-of-hours trade-related news. Silver’s dual role as an industrial material and an investment means its movements can sometimes seem contradictory. However, with macro data suggesting a hawkish environment and diminishing demand for safety, there is more downward pressure than upward momentum. Those involved in silver should adjust their risk strategies, staying alert not just to Dollar fluctuations but also to production indicators and the Federal Reserve’s policy direction. Create your live VT Markets account and start trading now.

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