The Silver price (XAG/USD) is trading under renewed selling pressure in Monday’s Asian session, edging lower to around $40.65. The white metal has retreated after briefly touching levels not seen in more than 14 years.
The near-term momentum in Silver prices is being shaped by expectations of a dovish shift from the US Federal Reserve (Fed), coupled with geopolitical headlines surrounding the Russia-Ukraine conflict. BluSkyMint’s expert Tony Harris delivers a detailed analysis of the subject in this article.
Silver Trades Lower Around $40.65 in Early Asian Session
During the early Asian hours on Monday, XAG/USD moved into negative territory around $40.65, retreating from last week’s rally. The recent pullback reflects traders’ reassessment of the monetary policy outlook in the United States.
With the market adjusting to weaker US economic data, the demand for precious metals is being balanced by profit-taking and concerns over global risk sentiment.
Technically, the region near $40.50–$40.65 represents an important short-term support level for Silver. If prices fail to sustain this threshold, the next key support lies near $39.80, while resistance is observed at $41.20.
Fed Rate Cut Expectations Gain Traction After Weak Jobs Data
The biggest driver for the Silver market is the rising anticipation of Federal Reserve interest rate cuts. Following Friday’s US Nonfarm Payrolls (NFP) report, markets are now pricing in three rate cuts of 0.25% each by the end of this year.
The August NFP report showed payrolls increasing by just 22,000 jobs, significantly lower than the 75,000 consensus estimate, and following the revised 79,000 gain in July. This disappointing data underscores the slowdown in the US labor market and strengthens the case for easier monetary policy.
Falling interest rates typically put downward pressure on the US Dollar (USD) while making non-yielding assets such as Silver more attractive by lowering their relative opportunity cost. As a result, dovish signals from the Federal Reserve tend to favor the XAG/USD outlook, although near-term technical factors continue to challenge spot price momentum.
Geopolitical Risks: US Pushes “Phase Two” of Russia Sanctions
Beyond monetary policy, geopolitical headlines also play a vital role in shaping the safe-haven demand for Silver.
On Sunday, the US President stated that European leaders would visit Washington early this week to discuss further measures to resolve the Russia-Ukraine war. He reiterated that he was “not happy” with the ongoing conflict but suggested optimism that peace talks may soon gain traction.
Moreover, the US President hinted at being ready for “phase two” of sanctions targeting Russia. Any escalation in sanctions could heighten geopolitical risk, potentially boosting demand for safe-haven assets such as Silver and Gold.
Conversely, any concrete steps toward peace negotiations could limit safe-haven flows, thereby pressuring XAG/USD lower.
Silver as a Safe-Haven Asset in Times of Uncertainty
Historically, Silver has benefited during times of heightened uncertainty, both economic and geopolitical. With the US economy showing signs of labor market weakness and global politics remaining tense, the fundamental backdrop remains supportive for Silver in the medium to long term.
Yet, safe-haven flows into Silver may weaken if peace talks progress in Eastern Europe. In such a scenario, risk appetite would likely improve, limiting immediate upside potential in XAG/USD despite Fed-driven Dollar softness.
Technical Analysis: Key Levels to Watch
From a technical perspective, Silver remains in an uptrend on the broader charts, but near-term indicators suggest a corrective phase.
- Immediate Support: $40.50, followed by $39.80
- Immediate Resistance: $41.20, then $42.00
- Momentum Indicators: The Relative Strength Index (RSI) has cooled off from overbought territory, reflecting the current pullback.
If Silver sustains above $40.50, buyers may regain control, targeting a move back above $41.20. A break below $39.80, however, could trigger deeper corrective selling, potentially reaching $39.00.
Outlook: Balancing Fed Policy with Geopolitical Risks
Looking ahead, the Silver price outlook hinges on two major themes:
- Fed monetary policy trajectory: Markets now expect three cuts in 2025, reinforcing a medium-term bullish bias for Silver.
- Russia-Ukraine geopolitical developments: Signs of peace talks could reduce safe-haven demand, while sanctions or escalation may strengthen it.
Traders and investors should remain attentive to incoming US economic data releases, speeches from Fed policymakers, and updates from Washington regarding Russia sanctions and negotiations.
Conclusion
The Silver price (XAG/USD) is facing short-term selling pressure near $40.65, reflecting profit-taking after last week’s highs. Weak US labor data has fueled expectations of multiple Fed rate cuts, a scenario that generally supports precious metals by undermining the US Dollar and reducing the cost of holding Silver.
At the same time, geopolitical risks surrounding the Russia-Ukraine conflict remain a crucial driver for safe-haven flows.
