Silver Rebounds as Hopes for US-Iran Diplomacy Ease Pressure

The price of silver (XAG/USD) rebounded to around US$57.90 per troy ounce, up 1.35% in Tuesday’s trading. This gain was supported by a weakening US dollar and a decline in Treasury yields, following reports of potential diplomatic progress between the United States and Iran—news that also triggered a sharp drop in oil prices.

Market sentiment improved after Israel’s Channel 12 reported a compromise proposal, allegedly originating from Pakistan, which had reportedly received preliminary approval from both Washington and Tehran. However, a diplomat involved in the negotiations later denied these reports, leaving significant uncertainty regarding the likelihood of an agreement.

Oil prices fell toward US$97.40, having previously breached the US$100-per-barrel mark. This decline in oil prices has the potential to alleviate concerns regarding energy-driven inflation, thereby allowing Treasury yields and the US dollar to soften—a development that serves as a positive catalyst for non-yielding assets like silver.

Nevertheless, silver’s upward momentum faces challenges stemming from the Federal Reserve’s policy outlook. Recent US CPI and PPI data, which came in higher than expected, indicate that inflationary pressures persist, keeping the possibility of an interest rate hike before the end of the year on the table.

The market currently assigns a relatively low probability to a Federal Reserve rate hike at the October meeting, while expectations for an increase in December remain high. Investors will now look to upcoming US Initial Jobless Claims and PMI data for further clues regarding the state of the economy and the future direction of monetary policy.

Newsmaker Analysis: Silver’s current rebound is driven by a weaker dollar, lower Treasury yields, and a decline in oil prices; however, it is not yet entirely free from interest-rate-related risks. Should inflationary pressures intensify, expectations for interest rate hikes could strengthen, potentially capping any recovery in XAG/USD.

Source: Newsmaker.id