Silver (XAG/USD) prices have fallen for the third consecutive day, trading near $55.50 per troy ounce during Asian hours on Thursday [1]. The metal is on track for a weekly decline of over 7%, driven by escalating tensions in the Middle East that have pushed oil prices higher and intensified concerns about inflation and interest rates [1]. According to Reuters, Iran has instructed Yemen’s Houthi militia to prepare to close the Red Sea oil route if the United States targets Iranian power infrastructure, posing a significant threat to global energy supplies [1]. Additional reports from the Tasnim news agency noted explosions in Bandar Abbas, Qeshm, and Ahvaz, with loud explosions also heard in Kuwait and Basra [1].
These geopolitical developments follow threats from US President Donald Trump, who warned that the US would strike Iran's bridges and power plants next week if Iran does not return to negotiations [1]. The heightened risk to energy supply has kept inflation and interest rate concerns at the forefront for investors, reducing demand for non-yielding assets like silver [1].
On the monetary policy front, softer-than-expected US inflation data this week has effectively ruled out a July rate hike, despite Federal Reserve Chair Kevin Warsh's continued commitment to fighting inflation and restoring price stability [1]. However, markets remain divided on whether the Fed will resume tightening in September, adding to the uncertainty weighing on silver prices [1].
Overall, the combination of geopolitical risks, rising energy costs, and ongoing interest rate uncertainty has led to significant downward pressure on silver, with the market closely watching for further developments in both the Middle East and US monetary policy [1].
CONCLUSION
Silver prices have experienced a sharp decline, falling over 7% this week as geopolitical tensions and interest rate uncertainty dominate market sentiment. With inflation concerns heightened by rising oil prices and no clear direction from the Federal Reserve, silver remains under pressure. Investors are likely to remain cautious until there is greater clarity on both geopolitical risks and US monetary policy.