Silver price declines as failed US-Iran talks lift Dollar, Oil-fueled inflation worries

Silver declines on Monday and trades around $74.10 after hitting an intraday low of $72.61.
The collapse of US-Iran negotiations revives geopolitical tensions and supports the US Dollar.
Rising Oil prices fuel inflation concerns and strengthen expectations of a more restrictive monetary policy.

Ghiles Guezout FXStreet

Silver (XAG/USD) trades around $74.10 on Monday at the time of writing, down 2.23% on the day after briefly dropping to an intraday low near $72.61. The white metal is attempting to stabilize its losses but remains under pressure as the US Dollar (USD) strengthens amid rising geopolitical tensions.

Market sentiment deteriorated after peace negotiations between the United States (US) and Iran failed over the weekend. Talks aimed at establishing a lasting ceasefire in the Middle East did not succeed, as Tehran refused to abandon its nuclear ambitions. In response, US President Donald Trump announced military measures aimed at blocking maritime traffic linked to Iranian ports, particularly around the Strait of Hormuz, a key route for global energy flows.

This escalation has revived concerns about global energy supply and triggered a sharp rebound in Oil prices. West Texas Intermediate (WTI) is rising strongly and trades around $97 per barrel, fueling renewed inflation fears across financial markets.

Higher energy prices are pushing investors to reassess expectations regarding the monetary policy of the Federal Reserve (Fed). Markets are now considering the possibility that interest rates could remain higher for longer, or even rise further if geopolitical tensions continue to drive inflationary pressures.

In this environment, non-yielding assets such as Silver tend to lose relative appeal. A higher interest-rate backdrop increases the opportunity cost of holding precious metals, limiting demand despite ongoing geopolitical uncertainty.

On the macroeconomic front, the calendar remains relatively light at the start of the week. Investors’ attention will turn to the release of the US Producer Price Index (PPI) on Tuesday, which could provide further clues about the evolution of inflationary pressures and the next steps in the Fed’s monetary policy.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Author

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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