Silver Hits 14-½-Year High

Silver fell to around $58.5 an ounce on Monday, snapping a two-day rebound as renewed exchanges of attacks between the US and Iran over the Strait of Hormuz lifted oil prices and rekindled inflation concerns. The conflict escalated since Thursday, with Iran targeting a container ship, a vessel carrying Qatari oil, and military bases in Kuwait and Bahrain, prompting multiple US retaliatory strikes. However, both sides later agreed to suspend further attacks ahead of peace talks set to resume this week in Doha, Qatar. Meanwhile, data last week showed US PCE inflation broadly matched expectations, leading investors to slightly pare back bets on Federal Reserve rate hikes this year. Markets are now awaiting the latest US monthly jobs report and the ISM Manufacturing PMI for further clues on the outlook for monetary policy.

Silver rose above $58 per ounce on Friday but remained down nearly 10% for the week, extending the losses recorded in the previous week, as the Fed's hawkish stance continued to support the US dollar. New Fed Chair Warsh reaffirmed the central bank's commitment to bringing inflation under control, easing concerns that he might bow to pressure from US President Trump to cut interest rates prematurely. The Fed also raised its 2026 PCE inflation projections, while the headline PCE inflation rate accelerated to 4.1% in May. Markets are now pricing in three Fed rate hikes this year, with the probability of the first increase in September standing at around 62%. Silver has broadly tracked the weakness across precious metals but has underperformed gold since the outbreak of the Iran war, losing roughly half its value since reaching a record high in January. Silver is also an industrial metal, making it more sensitive to changes in investors' risk appetite and expectations for global growth.

Silver dropped below $57 an ounce on Friday and was on track to lose about 14% for the week as hawkish signals from the US Federal Reserve outweighed support from the impact of US-Iran peace efforts. On Thursday, silver found some support after the latest US PCE inflation data came in broadly in line with expectations, easing fears of imminent Fed rate hikes and pushing the dollar and Treasury yields lower. Even so, markets are pricing in an 80% chance of a Fed rate hike in December following last week's hawkish pause, while the probability of a September increase stands at around 63%. Meanwhile, oil prices continued to retreat and have returned to pre-conflict levels as progress in US-Iran peace negotiations eased concerns over Middle East supply disruptions and further reduced inflation worries.