Silver Held Back as Interest Rate Risks Loom
Silver prices moved within a limited range during the European session on Wednesday (June 17th), as market participants awaited the Federal Reserve's policy decision and further developments on the interim US-Iran peace deal. XAG/USD was seen in the range of $69.73 to $70.24 per ounce, after previously moving in the $70 area.
Silver's movement was still supported by expectations that the US-Iran deal could reopen energy flows through the Persian Gulf. The two countries are scheduled to sign an interim agreement in Switzerland on Friday, with economic incentives for Tehran, including the possible resumption of Iranian oil exports.
From a fundamental perspective, falling oil prices were a key factor for precious metals. Brent briefly fell below $80 per barrel after the market assessed that the US-Iran deal could increase supply and mitigate inflation risks from the energy sector. If energy pressures continue to ease, expectations of interest rate hikes could also decline, supporting non-yielding assets like silver.
However, silver's upside potential remains limited as investors await the direction of the Fed's communication. The US central bank is widely expected to maintain interest rates, but market attention is focused on the tone of new Chairman Kevin Warsh, particularly whether the Fed will remove its easing bias or keep open the possibility of a tighter stance on inflation.
In terms of market transmission, silver finds support when yields and the US dollar weaken, as the opportunity cost of holding non-yielding assets becomes lower. Conversely, a hawkish signal from the Fed could lift yields and the dollar again, thus curbing interest in precious metals.
Other central bank decisions also play a role in the market backdrop. The Reserve Bank of Australia maintained its interest rate at 4.35%, while the Bank of Japan raised its interest rate by 25 basis points to 1%. This combination makes investors more selective in interpreting global policy direction ahead of the FOMC results.
The market's next focus will be the Fed's statement, interest rate projections, the direction of the US dollar, Treasury yields, and the certainty of the reopening of the Hormuz energy pipeline. As long as policy signals remain unclear, silver has the potential to remain limited in movement around the $70 area, with high sensitivity to changes in interest rate expectations. (arl)
Source: Newsmaker.id
