Silver prices are experiencing a downward correction, falling 1.35% to near $61.00 during the Asian trading session on Tuesday. This decline is attributed to the recent surge in oil prices, which has attracted buying interest following Iran's missile attack on commercial ships in the Strait of Hormuz. The Strait of Hormuz is a critical chokepoint for almost one-fifth of global energy supply, and the attack has reignited fears of energy supply disruptions, which could have significant implications for global inflation. This is particularly concerning given the ongoing war between the US, Israel, and Iran, which has already led to increased inflationary pressures due to rising energy prices. The impact of these disruptions on inflation has been witnessed by market participants in recent months. The Silver price underperformed during the Middle East war, as the increase in inflationary pressures due to rising energy prices prompted fears of interest rate hikes by global central banks. Higher interest rates are detrimental to non-yielding assets like Silver. Looking ahead, the release of the Federal Open Market Committee (FOMC) minutes from the June policy meeting on Wednesday will be a key trigger for the Silver price. The FOMC decided to leave interest rates unchanged and signaled a pause in forward-looking policy rate remarks. However, the minutes will provide valuable insights into the Federal Reserve's monetary policy outlook. In the near term, Silver's technical analysis suggests a bearish bias, with the XAG/USD trading lower at around $61.50. The spot price remains below the 20-day exponential moving average (EMA) at $63.35, and the Relative Strength Index (RSI) indicates persistent but not extreme selling pressure. Immediate resistance is located at the 20-day EMA, and a sustained break above this level could ease bearish pressure. Key support zones include the psychological level of $60.00 and the seven-month low of $55.63. Silver, a precious metal, is highly traded among investors for its intrinsic value and safe-haven status. It is used in various industries, particularly electronics and solar energy, due to its high electric conductivity. Silver prices are influenced by a range of factors, including geopolitical instability, investment demand, mining supply, and recycling rates. The US Dollar's behavior also plays a significant role, as a strong Dollar tends to keep Silver prices in check, while a weaker Dollar can propel prices upward. The Gold/Silver ratio is another important indicator, as Silver prices tend to follow Gold's moves. A high ratio may suggest undervaluation, while a low ratio could indicate overvaluation. In conclusion, the Silver price correction is influenced by geopolitical events, energy supply disruptions, and interest rate policies. The upcoming FOMC minutes will provide crucial insights, and investors should closely monitor these developments to make informed decisions in the volatile Silver market.
