Silver price analysis: volatility reverses gains amid the rising tensions

Silver price rose to a one-month high on Monday as financial markets reacted to the US military attack on Iran. However, it erased those gains earlier on Tuesday; pulling the white metal back to a level last recorded on 20th February. 

On the one hand, the heightened geopolitical tensions in the Middle East continue to support silver price above the short-term EMA. However, a stronger US dollar has curbed its upside. The steadiness observed in the US stock market has also improved the risk appetite in relation to the safe-haven appeal.

Subsequently, silver price will likely be subject to high volatility as investors remain keen on the US-Iran war and Fed outlook. At the time of writing, it was trading at $83.03; down by 6.85%. 

Silver price erases gains despite the ongoing US-Iran war

Geopolitical tensions have been one of the key bullish drivers for precious metals as investors steadily seek safety in these conventional safe-haven assets. It is these woes that bolstered silver price to a one-month high on Monday; setting the stage for its third consecutive week of gains. 

With no signs of the US, Israel, and Iran relenting, the white metal’s safe-haven appeal has sustained it above the crucial zone of $80. However, a stronger US dollar and stability in the US stock market have curbed its gains. Just like the precious metals, the greenback is also considered a conventional safe-haven asset. As such, the US-Iran war has pushed more investors to seek safety in the currency, subsequently weighing on the dollar-priced silver. 

Additionally, the US manufacturing PMI released on Monday came in stronger-than-expected at 52.4 compared to the estimates of 51.8. That marked the second straight month of expansion and raised prospects of a more hawkish stance by the Federal Reserve. 

A surge in Treasury yields, coupled with concerns that the US-Iran war may impact inflation through higher energy prices, further increased bets that the Fed may maintain interest rates elevated for longer. Notably, an environment of higher interest rates tends to weigh on silver price and other precious metals.  

SLV ETF technical analysis

The SLV silver ETF, which tracks the performance of the silver bullion, pulled back from the one-month high hit late last week. However, it held steady above the crucial zone of $80 on Monday as geopolitical tensions in the Middle East supported the precious metal’s safe-haven appeal.

A look at its daily trading chart hints at heightened volatility in the immediate term. SLV silver price may pull back past $80 as the bulls strive to defend the support along the 25-day EMA at $77.50. On the upside, it will need to clear the resistance at $87.75 for a chance to rally to the psychologically crucial level of $90. 

Nonetheless, increased fear and a weaker US dollar is needed to bolster SLV silver price back above the bullish trendline that has offered steady resistance for a month now.  On the flip side, a decline past the current support level of $77.50 will likely activate the lower zone of $75.15. This thesis will be valid for as long as silver price holds steady above the 50-day EMA at $73.80.