Silver (XAG/USD) extended its losses for the second consecutive day, trading around $66.10 per troy ounce during Asian hours on Monday [1]. The decline followed hawkish remarks from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium, where he stated that policymakers would 'have work to do' if they were not confident that cost-of-living pressures were easing for Americans [1]. Warsh emphasized, 'We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do' [1].
Market expectations for the next Federal Reserve interest rate decision, scheduled for September 15-16, shifted notably after Warsh's comments. According to the CME FedWatch tool, the probability of at least a 25 basis point rate hike next month rose to nearly 57.5%, up from 35% prior to Warsh's speech [1]. This increased likelihood of higher rates weighed on non-yielding assets like silver.
In addition to monetary policy concerns, silver prices were pressured by rising oil prices following Iran's launch of a coordinated barrage of ballistic and anti-ship cruise missiles across multiple locations, including Tehran, Lorestan, Karaj, Khorramabad, and Shiraz [1]. These strikes targeted positions toward the Strait of Hormuz and were in direct response to a United States strike on Iranian launchers at Larak Island, which marked the first direct attack on Iranian military positions in over a month [1]. The US strike specifically targeted rocket sites prepared to lay mines in the strategic waterway, with American forces closely monitoring the Strait to ensure the uninterrupted flow of global trade [1].
Despite these pressures, TD Securities noted that the backdrop for precious metals has improved as investors reassess the Fed's policy stance and the outlook for the US Dollar. Strategists highlighted that, 'beyond the Fed's willingness to look past an energy-driven inflation shock, the re-ignition of the dollar debasement theme has also fueled renewed macro discretionary appetite in precious metals,' which has helped draw fresh interest into the sector [1].
CONCLUSION
Silver prices have come under pressure due to hawkish signals from the Federal Reserve and heightened geopolitical tensions in the Middle East. However, some strategists see renewed investor interest in precious metals as market participants reassess the Fed's stance and the outlook for the US Dollar. The market remains focused on the upcoming Fed decision and ongoing geopolitical developments.