Silver’s rebound hopes fade as dollar strength turns $57 into resistance

Silver’s selloff is becoming a cleaner bet on tighter US policy.

The metal fell to around $56.50 an ounce in Asian trade on Friday, extending a sharp retreat as investors focused less on easing oil prices and more on stubborn inflation.

The latest US core PCE reading kept price pressures above the Federal Reserve’s comfort zone, while a firm dollar made the metal more expensive for overseas buyers.

For a market that offers no yield, that is a difficult mix.

Lower energy prices may help later, but traders are dealing with a Fed that still sounds uncomfortable with inflation today.

Fed repricing drives the selloff

The main pressure on silver is coming from the rates market.

Investors now expect the Fed to deliver at least one increase this year, a sharp reversal from earlier expectations that the next move would be a cut.

That shift followed a run of inflation data showing price pressures have not cooled enough.

Core PCE, the Fed’s preferred underlying inflation gauge, rose to 3.4% year-on-year in May from 3.3% in April, matching expectations but staying well above the 2% target.

New York Fed President John Williams also gave traders little reason to expect quick relief.

His message was that policy is already restrictive enough to lean against inflation, but that price pressures are still too high and may not return to target before 2028.

Dollar strength adds to the strain

The US dollar has become another drag on silver.

The dollar index has held near a one-year high, supported by the same rate-hike expectations that are weighing on precious metals.

That matters because silver is priced in dollars.

When the greenback strengthens, the metal becomes more expensive for buyers using other currencies, weakening demand from global investors and industrial users.

The move has also reduced the benefit from falling oil prices. Progress in US-Iran diplomacy has pulled crude back from conflict-driven highs, easing one source of inflation pressure.

But traders are not yet convinced that cheaper energy will be enough to change the Fed’s near-term stance.

Technical picture remains fragile

The chart still favours sellers. Silver is trading well below its 20-period exponential moving average near $65.82, keeping rallies vulnerable to fresh selling unless the metal can reclaim that area.

Source: TradingView

Momentum indicators are stretched, with the relative strength index in oversold territory.

That suggests the pace of selling could slow and leave room for short corrective bounces. It does not yet confirm a trend reversal.

The first important support sits near $55.63, followed by $53.35. A break below that zone would expose the psychological $50 level.

On the upside, $61.01 is the first serious hurdle before the market can even begin to challenge the broader downtrend.