Silver (XAG/USD) declined by 2.37% on Monday, trading around $57.75, as investors reacted to renewed geopolitical tensions in the Middle East and ongoing uncertainty regarding US Federal Reserve policy. The decline comes amid profit-taking and heightened concerns about potential disruptions to global energy flows following an exchange of strikes between the United States and Iran near the Strait of Hormuz over the weekend. This strategic waterway is critical, with nearly 20% of global energy supplies passing through it, and the situation has increased fears of supply risks and inflationary pressures [1].
Iran's Foreign Minister Abbas Araghchi emphasized that responsibility for the Strait of Hormuz lies with Tehran and warned that any attempt to bypass Iran's preferred route would result in 'tension and escalation.' Despite reports that Washington and Tehran could resume talks on Tuesday, uncertainty remains elevated [1].
The prospect of rising oil prices due to supply risks is fueling inflation concerns, which in turn is reinforcing expectations for a more prolonged restrictive monetary policy stance from the Federal Reserve. Higher interest rates increase the opportunity cost of holding non-yielding assets like silver, thereby exerting downward pressure on the metal's price [1].
Looking ahead, investors are focused on the upcoming June US labor market report, with Nonfarm Payrolls (NFP) data scheduled for release on Thursday. Economists expect the US economy to have added 114,000 jobs, with the unemployment rate forecast to remain unchanged at 4.3%. These figures are anticipated to influence expectations for the Fed's interest rate path and could serve as the next major catalyst for silver prices [1].
CONCLUSION
Silver prices have come under significant pressure due to heightened geopolitical risks in the Middle East and uncertainty over the Federal Reserve's policy outlook. The upcoming US labor market data is expected to be a key driver for silver's next move, as investors await further clarity on inflation and interest rates.