Silver rose 4% to about $70.80 in Asian trade after the Strait of Hormuz was reopened, easing energy-market tension following confirmation of a US-Iran peace deal. The route handles almost 20% of global energy supply, and oil sold off; WTI fell 4.8% to around $78.85, the lowest in more than three months. Earlier months of higher oil had fed global inflation pressures, which led markets to pare back dovish central-bank pricing and reduced the appeal of non-yielding assets such as silver.
Attention now turns to the Federal Reserve’s decision on Wednesday, with rates expected to remain at 3.50%–3.75%. In technical terms, XAG/USD remained below the 20-day EMA at $71.70, keeping a mild bearish near-term bias despite the jump. The RSI moved back into the 40.00–60.00 band after being below 40.00, with a move above 60.00 flagged as a firmer reversal signal; resistance levels cited include 78.83 and $80.00, while support is seen at $61.01. Silver’s broader drivers include USD moves, interest-rate expectations, ETF demand, mining supply and recycling, alongside industrial usage in electronics and solar, and cues from the Gold/Silver ratio.
Market Implications of the US-Iran Deal and Oil Price Drop
We are seeing a major shift in the market following the US-Iran peace deal and the reopening of the Strait of Hormuz. The resulting drop in oil prices is the most significant factor for us to consider right now. This fundamentally alters the inflation outlook for the coming months.
This development is bullish for non-yielding assets like silver, as it reduces pressure on the Federal Reserve to maintain a hawkish stance. With diminished inflation fears, the opportunity cost of holding silver decreases significantly. This makes it a more attractive asset in the current environment.
The recent drop in crude oil prices is one of the steepest since the 2020 demand shock, and it supports the view of easing price pressures globally. Last week’s US Consumer Price Index (CPI) data, which showed inflation cooling to a 2.8% annual rate, reinforces this outlook. This situation reminds us of the 2014-2015 oil price collapse, which preceded a period of delayed Fed rate hikes and relative strength in precious metals.
Trading Strategy and Technical Positioning
Given this backdrop, we should position for a potential rally in silver prices in the coming weeks. We are looking at buying call options with strike prices just above the current resistance near $71.70, targeting a move towards the $78 to $80 range. This strategy allows us to capture upside potential with a defined risk profile.
However, we must respect the technical picture, which shows the price is still below its 20-day moving average, signaling some lingering weakness. To manage this near-term risk, we could utilize bull call spreads to lower our entry cost. Alternatively, purchasing protective puts below the $65 level can hedge any long positions against a failed rally.
All eyes are now on the Federal Reserve’s announcement this Wednesday. We anticipate they will hold rates steady, but their forward guidance will be critical in confirming this new dovish outlook. We will look to add to our positions after the Fed statement if it validates our view of a less aggressive policy path.
