Silver price rebounds on softer Dollar amid US-Iran talks, high yields limit upside
- Silver rebounds toward $76.55 on Monday after last week’s sharp correction.
- Hopes of progress in US-Iran negotiations are weighing on the US Dollar and supporting precious metals.
- Elevated US Treasury yields and persistent concerns about inflation continue to limit Silver’s upside potential.
Silver (XAG/USD) trades around $76.55 on Monday, up 0.80% on the day at the time of writing, as the white metal stabilizes after last week’s heavy sell-off. The rebound comes as the US Dollar (USD) weakens modestly following renewed optimism surrounding possible diplomatic progress between the United States (US) and Iran.
Market sentiment improved after a spokesperson for Iran’s Foreign Ministry confirmed that discussions with Washington remain ongoing. According to Iranian officials, Tehran and Washington are reviewing a recent peace proposal, while technical discussions involving Iran and Oman are focused on restoring safe transit through the Strait of Hormuz.
The softer tone surrounding Middle East tensions has reduced demand for the safe-haven US Dollar. The US Dollar Index (DXY) eases toward the 99.10 area after reaching intraday highs earlier in the day, providing some support for Silver and other precious metals.
However, Silver’s recovery remains limited by persistently high global Bond yields and inflation concerns linked to elevated energy prices. The US 10-year Treasury yield holds near 4.6%, close to one-year highs, as investors continue to reassess the outlook for Federal Reserve (Fed) monetary policy.
Rising Crude Oil prices in recent days have reinforced fears that inflation could remain elevated for longer, leading markets to reduce expectations for aggressive Fed rate cuts. According to CME FedWatch data, traders are increasingly considering the possibility that the Fed may need to maintain restrictive monetary policy this year.
Higher yields tend to reduce the appeal of non-yielding assets such as Silver. OCBC strategist Christopher Wong noted that the recent surge in US yields and the stronger US Dollar had reversed part of the momentum that previously supported Silver, adding that sentiment remains fragile unless yields stabilize further.
Additional pressure on the Silver market comes from India’s recent decision to curb a large portion of Silver imports, a measure aimed at reducing pressure on the Indian Rupee. UBS analysts also recently lowered their forecasts for global Silver investment demand, citing softer industrial demand and increasing mining supply.
Despite these headwinds, the weaker US Dollar and improved market sentiment are allowing Silver prices to recover modestly at the start of the week.
Silver FAQs
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.
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.
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.
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.