Silver (XAG/USD) fell to $87.90 at the time of writing on Monday, a decline of 6.33% on the day and sharply reversing gains recorded earlier in the day. After initially benefiting from strong safe-haven demand amid the war in the Middle East, the white metal is now facing significant selling pressure, driven mainly by the renewed strength of the US dollar (USD).
The greenback is bidding up strength against the backdrop of war in the Middle East, as investors prefer the US dollar as a highly liquid safe-haven currency. The US Dollar Index (DXY) is up 1.08% to trade around 98.70, adding to the pressure on dollar-denominated commodities including silver.
The bullish momentum in the greenback is reinforced by a stronger than expected ISM Manufacturing Purchasing Managers’ Index (PMI). The ISM reported that the manufacturing PMI declined slightly to 52.4 in February from 52.6 in January, but beat the market consensus of 51.8 and remained well above the 50 threshold, indicating continued expansion in the sector.
Components of the report provide further support to the US dollar. The price paid index jumped sharply from 59 to 70.5, pointing to renewed cost pressures in the production pipeline. Meanwhile, the employment index improved to 48.8 but remains in contraction territory. The strong rise in input prices strengthens expectations that the Federal Reserve (Fed) will take a cautious stance before considering any near-term rate cuts.
Therefore, the ISM release acts as a catalyst, strengthening the already bullish trend in the US dollar. The pullback in real yields and the market positioning toward a more restrictive monetary policy scenario also mechanically impacts non-yielding assets like silver.
Despite persistent geopolitical tensions in the Middle East, which is fueling some degree of risk aversion, the current market dynamics are dominated by the strength of the US dollar.
silver technical analysis
In the 4-hour chart, XAG/USD trades at $87.95. The near-term bias turned mildly bearish when bulls failed to sustain the lead above $96.00 and the price dropped below the $92.00 support, underscoring the loss of bullish momentum. Spot now trades above the 50-period simple moving average (SMA) around $86.90, which acts as the first support area, before the 100-period SMA near $82.90, indicating a transition from a strong uptrend to a consolidation phase rather than a complete trend reversal. The Relative Strength Index (RSI) has retreated from the overbought zone above 70 towards 44, indicating reduced buying pressure and supporting the corrective tone.
Initial resistance has emerged at the recent rebound high of $94.50 and the peak just above $96.00. A recovery through these levels would reopen the path to the former impulse top and weaken the current pullback narrative. On the downside, a break below $86.90 would expose the next support band towards $82.90, before $81.50, where a rising trend structure lies, and a failure there would strengthen the bearish bias for the 4-hour outlook.
(The technical analysis for this story was written with the help of AI tools.)
