Silver (XAG/USD) extended its bearish trend on Thursday, trading around $63.00 and marking a 0.58% decline on the day at the time of writing, reaching a multi-month low [1]. The downward pressure on silver is attributed to investors reassessing the US monetary policy outlook following robust inflation data and escalating geopolitical tensions in the Middle East [1]. Despite rising concerns over potential military escalation between the United States and Iran—highlighted by US President Donald Trump's statement that the US would hit Iran 'very hard tonight'—investors have shifted their defensive flows toward the US Dollar rather than traditional safe-haven assets like silver [1].
The US Dollar's appeal has been bolstered by rising US Treasury yields, which are supported by persistent inflationary pressures. The Producer Price Index (PPI) climbed 6.5% year-over-year in May, marking its highest level since November 2022 [1]. This has led markets to increasingly price in a more aggressive tightening path from the Federal Reserve, with the CME FedWatch tool indicating a high probability of at least one Fed rate hike before year-end [1]. Higher real yields have reduced the attractiveness of non-yielding assets such as silver [1].
Analysts at ING emphasize that precious metals, including silver, remain closely tied to the direction of US Treasury yields and expectations for Federal Reserve policy. With the US Dollar maintaining its advantage and Treasury yields biased to the upside, silver continues to face significant selling pressure [1]. Market participants are now focused on upcoming US economic data and further developments in the Middle East conflict for additional direction [1].
CONCLUSION
Silver prices have come under significant pressure due to rising US yields, persistent inflation, and a shift in safe-haven demand toward the US Dollar. The market is now closely watching US economic data and geopolitical developments for further cues, with the outlook for silver remaining bearish as long as Fed tightening expectations persist.