Silver (XAG/USD) traded slightly lower on Thursday, hovering around $78.60 and marking a 0.49% decline for the day, though it remained close to recent highs [1]. The market's cautious tone was attributed to ongoing negotiations between the United States and Iran, with investors closely monitoring diplomatic signals regarding a potential agreement between Washington and Tehran [1]. Reports indicated that an extension of the ceasefire could be considered to allow more time for negotiations, which has modestly improved market risk sentiment and temporarily reduced demand for safe-haven assets such as Silver [1].
Despite some progress in the talks, significant disagreements persist, particularly on nuclear-related issues, leading investors to avoid taking strong directional positions on precious metals [1]. Additionally, tensions around the Strait of Hormuz continue to disrupt global oil supply, keeping crude prices elevated despite a recent pullback and fueling concerns about an energy-driven inflation shock [1].
These inflationary pressures complicate the Federal Reserve's policy outlook. St. Louis Fed President Alberto Musalem stated that current supply shocks risk undermining the Fed’s inflation and employment objectives, and suggested that the current interest rate range is likely appropriate for now [1]. He also noted that the oil shock could keep core inflation close to 3% through the end of the year [1]. Higher interest rates typically limit the appeal of non-yielding assets such as Silver [1].
Looking ahead, the trajectory of US-Iran negotiations and oil prices are expected to remain key drivers for Silver in the near term [1].
CONCLUSION
Silver prices edged lower as easing safe-haven demand, driven by US-Iran diplomatic developments and Federal Reserve caution, weighed on the market. Elevated oil prices and persistent inflation risks suggest that Silver may remain sensitive to geopolitical and monetary policy shifts in the coming months.