Silver fell nearly 8% on Friday, reversing earlier weekly gains as higher US Treasury yields and a firmer US Dollar weighed on bullion. XAG/USD was trading near $76.65, close to its lowest level in more than a week.
Recent US data showed stronger-than-expected inflation and steady consumer spending, lifting expectations of a possible Federal Reserve rate rise later this year. Higher oil prices linked to Middle East disruptions were also cited as adding to inflation pressure.
The CME FedWatch Tool shows markets expect rates to stay unchanged in the coming months, with about a 42% chance of a hike in December. Higher rates can reduce demand for non-yielding assets such as silver.
On the daily chart, price is below the 50-day SMA at $76.99 and the 100-day SMA at $81.28, while the 200-day SMA sits at $65.04. The RSI (14) is 47.37 and the MACD is about 0.66, with momentum easing.
Resistance is at $76.99, then $81.28, while support is near $65.04. Silver prices can also be influenced by the US Dollar, industrial demand, mining supply, recycling, and moves in gold.
We remember the sharp 8% drop in silver prices back in 2025, which was driven by fears of a hawkish Federal Reserve. Strong economic data at that time led many to believe a rate hike was coming, which strengthened the dollar and hit non-yielding metals hard. That period serves as a key lesson in how quickly sentiment can punish silver prices.
The situation today, in mid-May 2026, appears to be the opposite of what we saw last year. The latest Consumer Price Index report for April 2026 showed inflation has cooled to 2.9%, moving closer to the Fed’s target and easing pressure for rate hikes. As a result, the CME FedWatch Tool now indicates a nearly 70% probability that the Fed will begin cutting rates by its September meeting.
This shifting monetary policy outlook should be seen as a tailwind for silver, potentially weakening the U.S. dollar and increasing the appeal of precious metals. Industrial demand also remains a powerful factor, with global solar panel installations forecast to grow by over 15% this year, consuming millions of ounces of silver. Considering this backdrop, we should be positioning for potential upside rather than expecting a repeat of the 2025 sell-off.
For derivative traders, this suggests a move away from the bearish stances that were profitable last year. Buying call options to capture upward price movement or selling cash-secured puts at levels we believe will hold as support are strategies that align with the current fundamental picture. Volatility is still a risk, so using options allows for defined risk on these bullish bets.
Technically, the price action supports this view, unlike the setup in 2025 when silver was breaking down. We are currently seeing XAG/USD consolidate above its 50-day moving average, which is now acting as support around the $30.50 level. The Relative Strength Index is holding at a healthy 62, suggesting that bullish momentum is building without being overextended.
