Silver (XAG/USD) rose on Tuesday and traded near $78.80 at the time of writing, up 4.16% on the day. It reached a daily high of $79.32 after rebounding from about $72.60 on Monday.
The move followed a weaker US Dollar and improved market sentiment. Softer US inflation data also supported demand for precious metals.
US Producer Price Index data showed annual producer inflation rose 4% in March, below expectations of 4.6%. The monthly reading increased 0.5%, also below forecasts, which reduced expectations of tighter Federal Reserve policy.
The US Dollar Index (DXY) fell towards six-week lows as traders adjusted interest rate expectations. This added support for non-interest-bearing assets such as Silver.
Geopolitical news also affected sentiment after reports pointed to possible renewed US-Iran negotiations. Reuters reported diplomatic efforts could lead to talks in Islamabad in the coming days, following earlier tensions and a breakdown in previous discussions.
US President Donald Trump said Iranian officials had reached out to seek a possible agreement. The update suggested diplomatic channels remained open despite disputes over Iran’s nuclear programme.
Together, the weaker dollar, softer inflation readings, and easing tensions supported Silver’s recovery.
Given silver’s powerful move above $78, we see this as a moment to ride the bullish momentum fueled by a weaker dollar. Traders should look at buying near-term call options to gain upside exposure while defining their maximum risk. The surge in price is a clear reaction to the softer-than-expected March producer inflation figures.
This rally is bringing prices toward the major resistance level we saw during the commodity boom of 2025, when silver briefly topped $82. While the current trend is strong, we must be cautious as we approach that previous peak, which could trigger profit-taking. Historically, such rapid ascents are often followed by sharp, corrective pullbacks.
The latest Commitment of Traders report shows that hedge funds have increased their net-long positions in silver futures to the highest level in 18 months, indicating the trade is getting crowded. Implied volatility has also jumped, making options pricier but also signaling that the market expects significant price movement. This environment warrants using strategies that can profit from volatility itself, or at least setting tight stop-losses.
Fundamentally, the market is betting that the Fed will back away from the aggressive rate hikes we saw last year, which is a powerful tailwind for silver. This is compounded by strong industrial demand, particularly after a recent EU initiative announced subsidies for solar panel manufacturing, a sector that consumes over 120 million ounces of silver annually. We believe any price dips will be seen as buying opportunities by industrial users.
The geopolitical factor, especially renewed diplomatic efforts with Iran, is weighing heavily on the US Dollar. As long as these talks show progress, the dollar is likely to remain under pressure, providing direct support for precious metals. We will be closely watching the planned meetings in Islamabad, as any breakdown in negotiations could cause a rapid reversal in both the dollar and silver.
