Silver prices fell sharply during early European trading hours on Thursday, with XAG/USD dropping to around $72.30, its lowest level since May 6.
The decline came as renewed tensions between the United States and Iran boosted demand for the US Dollar and pressured precious metals.
The US military conducted new overnight strikes in Iran.
The strikes reportedly targeted a military site and also involved shooting down four Iranian one-way attack drones near the Strait of Hormuz.
The escalation in Middle East tensions pushed crude oil prices higher and strengthened the US Dollar.
The stronger greenback weighed on silver prices, as the metal is priced in US dollars and becomes more expensive for holders of other currencies.
Markets await US PCE inflation data
Investor attention now turns to the release of the US Personal Consumption Expenditures (PCE) Price Index data later on Thursday.
The report is expected to provide fresh signals regarding the Federal Reserve’s interest rate outlook for the remainder of the year.
The headline PCE Price Index is forecast to rise 3.8% year-on-year in April, compared to 3.5% in March.
Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, is projected to increase 3.3% year-on-year in April, versus the previous reading of 3.2%.
Market participants are closely monitoring the data for signs of persistent inflationary pressure.
A stronger-than-expected inflation reading could reinforce expectations that the Federal Reserve may keep interest rates elevated or pursue another rate hike this year.
Such a scenario could further pressure silver prices by supporting the US Dollar and increasing Treasury yields, reducing the appeal of non-yielding assets like precious metals.
Technical outlook remains bearish
From a technical perspective, XAG/USD continues to trade below the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day SMA on the daily chart.
This keeps the near-term bias tilted to the downside despite the recent rebound from lower levels.
The Relative Strength Index (RSI) currently stands at 41.76, remaining below the neutral 50 mark.
This suggests downside momentum is still present and that a decisive recovery has yet to emerge.
On the upside, immediate resistance is seen near the Bollinger 20-day SMA around $77.95.
The next resistance level stands at the May 25 high of $78.83.
Further higher, traders will watch the 100-day SMA near $81.30.
The upper Bollinger band around $86.86 could act as a more distant resistance zone if a stronger recovery or short-covering rally develops.
On the downside, the first key support level is located at the April 30 low of $71.22.
Below that, the psychologically important $70.00 level could come into focus.
Additional downside pressure may expose the lower Bollinger band near $69.00.
A sustained break below that area could open the door for deeper losses and push silver into lower, untested support zones on the daily chart.
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