On Thursday, renewed geopolitical tensions between the United States and Iran led to a surge in energy prices, fueling concerns about persistent global inflation and impacting multiple asset classes. Silver (XAG/USD) fell toward $56.70, down 1.85% on the day, as investors anticipated tighter monetary conditions for an extended period, which is generally unfavorable for non-yielding assets like Silver [1]. Gold (XAU/USD) also edged lower, trading around $4,028, down 0.80%, despite softer-than-expected US inflation reports for June. The latest Consumer Price Index (CPI) and Producer Price Index (PPI) data showed further moderation in price pressures, prompting markets to scale back expectations of additional Federal Reserve (Fed) monetary tightening [1][2]. According to the CME FedWatch tool, the chance of a Fed interest rate hike at the July meeting has fallen to around 10%, down from above 30% a week ago [1].
Geopolitical risks intensified as US President Donald Trump threatened to expand attacks on Iranian infrastructure if Tehran refuses to negotiate, and the US carried out a fifth consecutive night of strikes against Iranian targets. Iran responded by targeting US assets in Kuwait, Bahrain, and Jordan, and declared the Strait of Hormuz a "red line" for US interference [1][2][3]. The suspension of crude loading operations at several Iraqi terminals following a drone-related incident further heightened fears of global oil supply disruptions, supporting higher energy prices [1].
The US Dollar Index (DXY) traded slightly higher near 100.57, as elevated energy prices and Middle East tensions kept global inflation projections de-anchored [3]. The Euro (EUR/USD) traded marginally lower to near 1.1460, reversing early gains as the US Dollar bounced back [3]. In the last two trading days, the US Dollar faced selling pressure as traders scaled back Fed rate hike expectations due to cooling US inflationary pressures in June [3].
Technical analysis for Gold indicates a bearish bias, with XAU/USD trading below key moving averages and resistance clustered around $4,200. The Relative Strength Index (RSI) near 40 leans slightly bearish, and the MACD remains positive but with declining momentum, suggesting structural headwinds for any rebound [2]. Upcoming US economic data, including Retail Sales and Initial Jobless Claims, as well as speeches from Fed officials Lorie Logan and Jeffrey Schmid, are expected to influence market sentiment further [2][3]. US Retail Sales for June are estimated to have risen at a moderate pace of 0.2% Month-on-Month (MoM) against 0.9% in May, with the release scheduled for 12:30 GMT [3].
CONCLUSION
Heightened Middle East tensions and rising energy prices have triggered renewed inflation fears, leading to declines in Silver and Gold and a rebound in the US Dollar. While softer US inflation data has reduced expectations for imminent Fed rate hikes, geopolitical risks and upcoming economic releases remain key drivers for market direction. Investors are closely watching US Retail Sales and Fed commentary for further clues on monetary policy and asset performance.