US–Iran Conflict and Rate Hikes Pressure Silver Prospects
Silver prices remained weak on Wednesday (June 10), with XAG/USD hovering in the US$65.1–US$65.7/oz range after dropping to US$63.38/oz intraday. This pressure indicates that the precious metals market is still reeling from a combination of geopolitical sentiment, energy prices, and US interest rate expectations.
Silver's weakness came after US inflation data for May met expectations but still indicated high price pressures. Annual CPI rose to 4.2%, while core CPI was at 2.9%. These figures reinforce the view that the Fed is likely to remain cautious about lowering interest rates, especially as energy prices rise again due to conflicts in the Middle East.
For silver, the fundamental transmission is quite clear: the US–Iran conflict increases the risk of energy disruptions, oil prices rise, inflation has the potential to remain high, and then interest rate expectations also harden. This puts pressure on precious metals because silver offers no yield, making it less attractive when the market begins to price in higher interest rates for a longer period.
Middle East tensions returned to focus after the US and Iran launched new attacks on each other. Reuters reported that oil prices rose following the escalation, with WTI hovering around US$89.64/barrel and Brent around US$92.65/barrel. The oil rally kept inflation concerns alive and made the market more sensitive to the direction of the Fed's policy.
Pressure on silver also aligns with the weakening of other precious metals. Reuters noted that gold and silver fell sharply during the same session, despite slightly lower-than-expected monthly core CPI data. This suggests the market is more focused on the risks of energy inflation and the possibility of further interest rate hikes than simply the more benign core CPI figure.
For now, silver remains in a defensive phase. As long as the US-Iran conflict persists and oil prices remain high, the recovery potential for XAG/USD is likely limited. Key variables to monitor include developments in the Strait of Hormuz, the direction of oil prices, the Fed's signals after the CPI, and whether the dollar and Treasury yields will strengthen again. (Arl)
Source: Newsmaker.id
