Silver (XAG/USD) traded around $57.90 per troy ounce during Asian hours on Thursday, retreating after modest gains the previous day, as the Federal Reserve (Fed) decided to keep its policy rate steady at 3.5%–3.75% during its July meeting despite ongoing inflationary pressures linked to renewed conflict in the Middle East [1]. The Fed's decision to hold rates, rather than raise them, provided some support to silver, as higher borrowing costs typically reduce demand for non-yielding assets like precious metals [1].
The Federal Open Market Committee (FOMC) vote revealed internal disagreement, with Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed Chief Neel Kashkari dissenting in favor of a 25-basis-point rate hike [1]. Fed Chairman Kevin Warsh emphasized the central bank's commitment to bringing inflation back to its 2% target, while refraining from explicit forward guidance on future rate moves [1]. The Fed's Monetary Policy Statement received a 7.4/10 on the FXS Speechtracker, indicating a hawkish tilt compared to the historical average of 4.9/10 [1]. The FXS Fed Sentiment Index remained unchanged at a high 128.64, reinforcing the perception of a restrictive policy stance [1].
Expectations that the Bank of England and Bank of Japan will also keep rates on hold this week, while maintaining a cautious approach to inflation, contributed to the market's cautious tone [1]. The combination of a high FXS Fed Sentiment Index and Speechtracker score suggests the Fed is likely to maintain restrictive policy, which could support the US Dollar and limit its downside against the Euro and Yen [1].
Geopolitical tensions in the Middle East, particularly following an attack on US forces in Jordan and President Donald Trump's pledge of a decisive response, continue to influence global markets. Diplomatic efforts remain stalled, with Tehran insisting on control over the Strait of Hormuz [1].
CONCLUSION
Silver prices remain below $58 per ounce as the Fed's hawkish pause and ongoing geopolitical tensions shape market sentiment. The Fed's firm stance on inflation and restrictive policy bias are expected to support the US Dollar, potentially capping further gains in silver. Investors remain cautious amid central bank decisions and unresolved Middle East tensions.