Silver Price Forecast: XAG/USD finds temporary support near $63.50; downside remains likely

Silver price (XAG/USD) rebounds to near $65.00 in the European trading session on Wednesday after attracting bids at around over the two-month low of $63.45 earlier in the day. The recovery move by the Silver price appears lacking conviction as Middle East tensions have renewed, following exchange of attacks between the United States (US)-Iran.

The US Central Command (CENTCOM) confirmed launching a series of attacks on Iran’s air defense, ground control stations, and surveillance radar sites near the Strait of Hormuz, a move that was expected after US President Donald Trump vowed to retaliate against Iran for shooting down a US Apache helicopter.

In response, Iran’s armed forces launched missiles on US airbases in Jordan, Kuwait, and Bahrain, and have warned of more attacks. Iran's Foreign Minister Abbas Araghchi has also released a warning for its neighbors in the Gulf for supporting the US, stating that they should have a “legal and moral responsibility” to prevent American and Israeli strikes.

Signs of US-Iran tensions escalating are an unfavorable scenario for the Silver price, as it has prompted oil prices, which could keep global inflation expectations higher and eventually hawkish Federal Reserve (Fed) bets.

Higher interest rates by the Fed bode poorly for non-yielding assets, such as Silver.

Later in the day, investors will focus on the US Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT. The US headline and core CPI are expected to arrive higher at 4.2% and 2.9% Year-on-Year (YoY), respectively.

Silver technical analysis

XAG/USD bounces back to near $65.00 in the European trade. Still, the white metal holds a bearish near-term bias, as price remains well beneath the 20-day exponential moving average (EMA) at $72.89. The positioning below this key dynamic barrier suggests that sellers retain control, while the Relative Strength Index (RSI) at 32.09 hovers near oversold territory, hinting that downside pressure persists even as the pace of the decline could soon begin to moderate.

On the topside, the 20-day EMA at $72.90 is the first meaningful resistance that bulls would need to reclaim to ease the current downside pressure and open scope for a more sustained recovery. Looking down, the white metal could fall to the March 23 low at $61.01 if it fails to hold its recovery move.