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- Silver falls due to rising expectations of a hawkish Federal Reserve stance.
- Fed officials are abandoning rate cuts and considering hikes if inflation fails to cool.
- Traders remain cautious over inflation risks and interest rate outlooks amid ongoing US-Iran peace negotiations.
Silver price (XAG/USD) declines after two days of gains, trading around $76.10 per troy ounce during the Asian hours on Friday. The non-yielding white metal struggles amid rising odds of hawkish sentiment surrounding the Federal Reserve (Fed) policy stance.
Elevated energy prices linked to the Strait of Hormuz threaten to feed into core US consumer prices and inflation expectations, which could potentially push the Fed to keep interest rates higher. Furthermore, a stronger US economic growth outlook is adding weight to the case for monetary tightening and putting pressure on non-interest-bearing assets, including Silver.
Fed officials remain cautious as they evaluate whether to adjust short-term interest rates. While they are currently holding the federal funds rate steady, policymakers are moving away from the idea of rate cuts and are increasingly open to raising rates if inflation fails to cool down.
US-Iran peace negotiations kept investors cautious over inflation risks and the outlook for interest rates. US Secretary of State Marco Rubio noted there were some encouraging signs surrounding a possible deal with Iran, adding that Pakistani mediators are expected to visit Tehran while Iranian officials review Washington’s latest proposal.
Meanwhile, senior Iranian officials clarified that no deal has been officially reached with the United States, but they acknowledged that the gaps between the two nations have narrowed. However, according to Reuters, the Islamic Republic’s Supreme Leader, Mojtaba Khamenei, stated that Iran’s uranium enrichment and Tehran’s control over the Strait of Hormuz remain major sticking points in the negotiations.
Iran is reportedly negotiating with Oman to implement a permanent toll system to formalize its authority over shipping traffic in the Strait of Hormuz, a proposal that President Donald Trump has firmly rejected.
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