Silver (XAG/USD) fell more than 3% on Monday as the US Dollar rose on safe-haven demand linked to rising US-Iran tensions in the Strait of Hormuz. XAG/USD traded at $72.74 after hitting $76.00, as the US Navy began Donald Trump’s “Operation Freedom”.
After gains on Friday, XAG/USD reversed and formed a bearish engulfing pattern on the chart. The Relative Strength Index (RSI) points to bearish momentum.
Key Support And Downside Levels
A drop below $70.86, the latest cycle low and the 20 April swing low, could extend losses. Further levels are $70.00 and April’s low of $68.28.
On the upside, buyers need a move above $73.00 to target higher levels. Next resistance points are the 4 May high of $76.98 and $78.00.
Silver prices can be affected by geopolitical risk, recession concerns, interest rates, and the US Dollar because the metal is priced in dollars. Prices are also shaped by demand, mining supply, recycling, industrial use in electronics and solar energy, and trends in the US, China, and India, and they often track gold.
A year ago, we saw silver prices fall sharply as geopolitical tensions drove investors to the safety of the US Dollar. Today, on May 5, 2026, the situation is different as the diplomatic track has eased those specific US-Iran fears. This shift away from a crisis-driven market allows us to focus on more fundamental drivers for silver in the coming weeks.
Macro Backdrop And Fundamental Drivers
Unlike last year, the US Dollar is not benefiting from the same safe-haven demand, and the Federal Reserve has signaled a pause in its rate-hiking cycle. A weaker dollar and stable interest rates create a favorable environment for non-yielding assets like silver. This contrasts with the conditions in early May 2025, where a strengthening dollar was a major headwind for precious metals.
Industrial demand continues to be a powerful catalyst for silver, far surpassing expectations from last year. Global industrial consumption is forecast to hit a new record of 690 million ounces in 2026, driven by a 20% year-over-year surge in demand for solar panels and EV manufacturing. This robust industrial use provides a strong floor for prices, a factor that was secondary to geopolitics this time in 2025.
The Gold/Silver ratio, which was climbing above 85:1 around this time last year, has since corrected to a more historically average level of 78:1. We still see this as elevated, suggesting silver remains undervalued compared to gold and has more room to catch up. This may encourage traders to look for relative value trades, favoring silver over gold.
From a technical standpoint, the bearish patterns of May 2025 are a distant memory. Instead of struggling at the $73 level, silver is now consolidating above strong support at $82 and is looking to test the multi-year high near $88. For derivative traders, this setup may favor buying call options or establishing bull call spreads to capitalize on potential upward momentum toward the $90 mark.
