Silver price (XAG/USD) fell 0.8% to near $55.00 during the early European trading session on Friday, marking a fresh Year-To-Date (YTD) low at $54.77 earlier in the day [1]. The decline is attributed to intense selling pressure following threats from Iran to close the Red Sea, which could further squeeze global energy supply. Iran's warning came after US President Donald Trump stated in a FoxNews interview that he would authorize attacks on Iranian bridges and power plants if Tehran does not engage in negotiations [1]. This escalation in geopolitical tensions has heightened fears of rising oil prices, which could keep inflation projections elevated and prompt central banks to tighten monetary conditions, thereby diminishing the appeal of non-yielding assets like Silver [1].
Additionally, a slight uptick in the US Dollar is weighing on Silver prices. The US Dollar Index (DXY) is up 0.1% to near 100.80, making Silver a less attractive risk-reward bet for investors as a stronger Dollar typically suppresses the price of dollar-denominated assets [1]. Despite these pressures, the probability of a Federal Reserve interest rate hike has decreased, with the CME FedWatch tool showing odds dropping to 10.2% from 24.6% a week ago, following softer US CPI data [1].
Market participants are closely monitoring the interplay between geopolitical risks, energy supply concerns, and central bank policy. The prospect of higher oil prices and persistent inflation could lead to further monetary tightening, which is generally negative for Silver. However, the reduced likelihood of a Fed rate hike may offer some support to Silver prices if inflation concerns subside [1].
CONCLUSION
Silver has reached a new YTD low amid heightened geopolitical tensions and a stronger US Dollar, with market sentiment leaning negative due to inflation and energy supply fears. While the probability of a Fed rate hike has diminished, ongoing risks suggest continued volatility for Silver in the near term.