Silver (XAG/USD) Struggles Near the Lower End of One-week-old Range, Holds Above $68.00

Silver (XAG/USD) attracts fresh sellers during the Asian session on Monday and slides to the lower end of a familiar trading range held over the past week or so. The white metal is currently placed above the $68.00 mark, down nearly 2.0% for the day, and seems vulnerable to slide further.

As the US-Iran conflict entered its fifth week, rising military activity kept investors on edge and benefited the US Dollar's (USD) status as the global reserve currency, undermining USD-denominated commodities, including the XAG/USD. In the latest development, the Washington Post reported that the Pentagon is preparing for weeks of ground operations in Iran, potentially including raids on Kharg Island and coastal sites near the Strait of Hormuz.

Iran’s parliament speaker, Mohammad Bagher Ghalibaf, said Iranian forces are waiting and ready to retaliate if US troops are deployed on the ground. Separately, Yemen’s Iran-aligned Houthis claimed two missile launches at Israel within 24 hours and warned that further attacks would follow in the coming days.  The Houthis' entry raises the risk of further disruption to global trade passing through the Bab el-Mandeb Strait off the Red Sea.

This remains supportive of a further rise in Crude Oil prices, fueling inflation fears and bolstering bets for a hawkish stance from the US Federal Reserve (Fed). In fact, traders now seem to have fully priced out the possibility of any further rate cuts by the US central bank and rapidly increasing bets for a hike by the end of this year. The outlook turns out to be another factor providing an additional boost to the USD and weighing on the non-yielding XAG/USD.

Even from a technical perspective, the range-bound price action might be categorized as a bearish consolidation phase against the backdrop of the recent breakdown below the 100-day Simple Moving Average (SMA). This validates the negative outlook and suggests that the path of least resistance for the XAG/USD is to the downside. That said, it will still be prudent to wait for sustained weakness below the range before positioning for any further depreciation.