Published on: 2025-06-17
XAGUSD—the silver to US dollar pair—has recently witnessed a sharp rally, rising close to $36.50 as geopolitical tensions between Israel and Iran fuel demand for safe-haven assets. The surge comes amid rising fears of a wider regional conflict, coupled with market anticipation surrounding the US Federal Reserve's interest rate decision.
The ongoing military conflict between Israel and Iran has heightened global uncertainty. In particular, continued Iranian airstrikes on Israeli territory have caused market participants to seek refuge in traditional safe havens such as silver. As a result, XAGUSD experienced a strong upward move during Tuesday's European trading session, nearing multi-year highs.
Reports indicate that Iran has urged neighbouring Middle Eastern nations to pressure US President Donald Trump to intervene and mediate a ceasefire with Israeli Prime Minister Benjamin Netanyahu. In response, Trump has asked Vice President J.D. Vance and a special Middle East envoy to engage in talks with Iranian representatives during the G7 summit, according to The New York Times.
While geopolitical risks dominate the headlines, market participants are also keeping a close eye on the US Federal Reserve. The central bank is widely expected to hold interest rates steady at 4.25%–4.50% during its upcoming policy announcement on Wednesday. According to the CME FedWatch Tool, there is a strong market consensus that the Fed will maintain its current stance.
The silver market often reacts sensitively to changes in interest rate expectations. Higher interest rates tend to weigh on XAGUSD, as silver is a non-yielding asset. However, any hint of future rate cuts could offer further upside potential for the precious metal.
From a technical standpoint, XAGUSD is exhibiting bullish momentum despite a brief pause near the $36.90 level—its highest point in over a decade. The 20-day Exponential Moving Average (EMA), currently near $34.63. continues to slope upwards, supporting the short-term bullish view.
Meanwhile, the 14-day Relative Strength Index (RSI) has cooled off from overbought levels and now sits near 60.00. This reset in momentum could provide room for the RSI to resume its upward trajectory, reinforcing the case for further gains.
Looking ahead, the $40.00 mark stands out as a key psychological resistance level. On the downside, the previous high of $34.87 from 22 October is expected to serve as a strong support area.
Given the combined impact of geopolitical uncertainty and upcoming Fed guidance, XAGUSD is likely to remain volatile in the near term. If Middle East tensions escalate further or if the Fed signals a more dovish policy outlook, silver prices may extend their rally beyond current highs.
However, traders should remain cautious, as silver's status as a non-yielding asset could face pressure if interest rates remain elevated for longer than expected. The balance between safe-haven demand and monetary policy will be crucial in determining the next move for XAGUSD.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
