Spot silver maintained a firm, range-bound trend during Monday's European session, with prices hovering around the mid-$77 range. Although the metal failed to decisively breach the key resistance zone near $79 during the session, a broad decline in the U.S. dollar index and improved market risk sentiment provided some support for silver.
Current market activity is largely centered on the U.S.-Iran peace negotiations. Growing expectations that the two sides may be nearing an agreement have significantly boosted global risk sentiment, cooling demand for the U.S. dollar as a safe haven and, in turn, providing buying support for precious metals as a whole. Over the weekend, U.S. President Donald Trump stated that a deal with Iran was close to being finalized, including key elements such as the reopening of the Strait of Hormuz. This news alleviated market concerns over energy supply risks from the Middle East and spurred a notable improvement in risk appetite.
However, Trump later added that the U.S. would maintain the blockade of the Strait of Hormuz until a formal agreement is reached and urged negotiators "not to rush into a deal." These contradictory statements have kept the market cautious about future developments in the Middle East. While overall risk sentiment has improved, geopolitical risks have not been fully eliminated, leaving some safe-haven demand intact in the precious metals market. Meanwhile, with U.S. and U.K. markets closed for the Memorial Day holiday, overall global trading volumes were relatively subdued. In this low-liquidity environment, precious metal prices were influenced more by dollar movements and technical buying. Recent pressure on the U.S. dollar index has also been a key factor supporting silver's resilience at higher levels.
As market expectations for further Federal Reserve rate hikes have cooled, the dollar's yield advantage has begun to wane. Previously, rising international oil prices and tensions in the Middle East had sparked concerns that U.S. inflation might reaccelerate, potentially prompting the Fed to maintain higher interest rates for longer. However, with progress in U.S.-Iran talks, international oil prices have seen a notable pullback, easing fears of a worsening U.S. inflation outlook. Bets on additional Fed rate hikes this year have significantly decreased, and the retreat in the dollar index is supporting dollar-denominated precious metals like silver.
Furthermore, silver possesses both precious metal and industrial attributes. When market risk appetite improves, investors typically increase their focus on assets tied to industrial demand, such as silver, providing additional support.
From a technical perspective, silver is currently forming a clear technical correction pattern. After a significant prior pullback, prices are gradually developing an "inverse head and shoulders" reversal structure, often viewed as a signal of a potential interim bottom. The market is now closely focused on the resistance area near $79. This level not only corresponds to the high from May 19 but is also close to the 38.2% Fibonacci retracement level of the previous downtrend.
If silver can decisively break through the $79.00 to $79.20 zone, it could open the door for further upside, potentially retesting the key $80 psychological level. The next significant target lies around $83, an area that also aligns with a previous important support zone and the 61.8% Fibonacci retracement level. On the daily chart, the RSI indicator is currently in neutral-to-strong territory above 50, indicating a gradual improvement in short-term momentum. Meanwhile, the MACD indicator remains above the zero line with expanding red bars, reflecting that bullish forces still hold some advantage. However, given silver's substantial prior gains, the market may still face some short-term profit-taking pressure. Additionally, a rebound in the dollar index or renewed hawkish signals from the Fed could also cap silver's advance.
On the downside, the area around $77 currently forms an important short-term support zone. This level, which corresponds to the high from May 21, has now transitioned from prior resistance to interim support. A break below $77 could see prices retreat further toward the $75 area, with more critical support located around $73.10.
Overall, the current silver price action is primarily driven by a combination of a weaker dollar, progress in U.S.-Iran talks, and technical rebound patterns. While the short-term bias remains firm, future price direction will depend on developments in the dollar, Fed policy expectations, and the latest progress in Middle East negotiations.