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Source: Newsmaker.id
Silver prices (XAG/USD) weakened during Monday's trading (Oct 12) after previously recording a gain of over 2.5%. Silver hovered around US$60.70 per troy ounce during the European session, facing pressure from inflation concerns and the potential for renewed oil price hikes driven by escalating geopolitical tensions in the Middle East.
An attack on King Khalid International Airport in Riyadh has heightened the risk of escalation between Saudi Arabia and the Iran-backed Houthi group. US President Donald Trump has even considered the possibility of US involvement in a Saudi retaliatory strike against the Houthis. Meanwhile, an oil tanker was also reportedly hit by a drone near Omani waters, not far from the Strait of Hormuz.
For the silver market, these developments present a double-edged sword. On one hand, rising geopolitical tensions can boost demand for safe-haven assets like precious metals. On the other hand, if the conflict disrupts energy supplies and drives up oil prices, inflationary pressures could intensify. Such conditions could prompt central banks to maintain high interest rates for longer, weighing on non-yielding assets like silver.
Regarding US monetary policy, the likelihood of a Federal Reserve interest rate hike in October has diminished. The market now estimates the probability of a minimum 25-basis-point hike at just 19.4%, down from 24.4% the previous week. However, expectations for a hike in December remain high at around 86%. Meanwhile, the University of Michigan's consumer sentiment index fell to 46.3 in October from 48.1 previously, signaling a weakening in US economic sentiment.
Newsmaker observes that silver's current price movements will be largely determined by the tug-of-war between safe-haven demand and pressures stemming from inflation and interest rates. If an escalation in the Middle East drives oil prices back up, pressure on inflation expectations and yields could limit silver's gains. Conversely, if oil prices remain contained and expectations for Federal Reserve rate hikes continue to decline, silver could resume its rebound following today's correction.
Source: Newsmaker.id