Silver Holds, Market Warns of Energy Inflation Risk
Silver prices held steady around US$73/oz on Wednesday (April 28th) after falling more than 3% in the previous session. The decline occurred as the market assessed that the deadlock in US-Iran peace talks and the closure of the Strait of Hormuz still kept inflation risks high.
Geopolitical uncertainty was again a key driver. US President Donald Trump said Iran had asked the US to lift its naval blockade of the Strait of Hormuz while negotiations to end the conflict continued. On the supply side, shipping disruptions in the waterway have kept energy supplies from the Middle East tight.
The Strait of Hormuz itself typically carries around 20% of global oil flows. The prolonged closure triggered a surge in energy costs, which the International Energy Agency (IEA) called the largest supply shock ever recorded, increasing inflationary pressures in many energy-importing countries.
For non-yielding precious metals like silver, this inflation risk has a tendency to exert pressure through monetary policy. Markets are increasingly pricing in the possibility of central banks keeping interest rates higher for longer or even tightening further, which typically reduces the appeal of non-yielding assets.
This week, the Bank of Japan has already held interest rates, while policy decisions from the Fed, ECB, Bank of England, and Bank of Canada will be the next catalysts. Central banks' attitudes toward energy inflation risks will determine the direction of the dollar, yields, and the recovery potential for silver.
In the very near term, silver's movements are expected to remain sensitive to two variables: developments in US-Iran diplomacy (which affect the energy risk premium) and central bank signals regarding the interest rate path. (asd)
Source: Newsmaker.id
