Silver Plummets, Dollar Strengthens Amid Escalating Iran Conflict
Silver prices fell nearly 5% to around $71 per ounce on Thursday (April 2), pressured by a stronger US dollar and rising oil prices after US President Donald Trump vowed to escalate attacks on Iran. The combination of a stronger dollar and rising inflation concerns has boosted market expectations for higher interest rates, which is typically a negative sentiment for precious metals.
In his statement, Trump said US forces were “close to reaching” military targets in Iran, but did not provide an exit strategy or timetable for ending the month-long conflict. Instead, he asserted that the US would strike Iran “very hard” in the next “two to three weeks.” Tehran rejected Trump’s claim that Iran had requested a ceasefire and insisted the Strait of Hormuz remains under the control of the IRGC.
The strengthening of the dollar, a safe-haven asset, has pressured the price of dollar-denominated precious metals. Silver has fallen more than 20% since the conflict broke out on February 28, signaling continued pressure as geopolitical risks fuel a surge in oil prices, heighten inflation concerns, and shift expectations for tighter monetary policy.
Cause:
Trump's escalatory rhetoric increased the risk of a prolonged war and boosted oil prices.
The oil rally fueled inflation concerns, reinforcing expectations of higher interest rates.
The dollar strengthened as a safe haven, pressuring dollar-priced precious metals.
Result:
Silver prices fell nearly 5% to around US$71 per ounce, extending their decline since the conflict began.
The pressure spread to precious metals as the opportunity cost of holding non-yielding assets rose as interest rate expectations strengthened.
Commodity market volatility has the potential to remain high as the direction of the Iran conflict and the status of the Strait of Hormuz remain key catalysts.
Source: newsmaker.id
