Silver Remains Volatile

Silver held below $90 per ounce on Tuesday after losing nearly 5% in the previous session, remaining volatile and underperforming other safe-haven assets despite risks of further escalations in the Middle East. The white metal also came under pressure from the rallying dollar which emerged as a clear winner as investors rushed for the reserve currency amid surging energy prices. Markets have pushed back expectations for the next Federal Reserve rate cut to September from prior forecasts of July, though two 25 basis point reductions remain priced in. The US military is anticipated to escalate attacks on Iran, potentially targeting missile production facilities, drones and naval assets. Meanwhile, a senior Iranian official warned that ships attempting to transit the Strait of Hormuz could be targeted, with tanker flows effectively halted amid elevated security risks.

Silver prices collapsed over 6% toward $88 on Monday, paring a 3% morning rally as a massive "risk-off" rotation and a surging US dollar overran earlier safe-haven buying. While the initial strikes on Iran triggered a spike to 96.40 dollars, the market’s focus shifted to the economic fallout of the Strait of Hormuz closure, which threatens 20% of global energy flows and risks a deep industrial slowdown. This threat to energy-intensive manufacturing has dampened the demand outlook for silver in the solar and electronics sectors, causing it to underperform gold's relative stability. Pressure intensified as the ISM Manufacturing Prices Index leaped to 70.5, a 11.5 point jump that signaled reignited inflation and slashed the probability of Fed rate cuts. With the US dollar hitting a five-week high and 10-year Treasury yields climbing, the opportunity cost of holding silver has soared, while liquidations by leveraged futures traders to cover broader stock market losses added pressure.

Silver retreated toward 93.50 dollars on Monday, paring earlier gains as the initial safe-haven spike met resistance from a surging US dollar. The white metal jumped nearly 3% to 96.40 dollars after joint US and Israeli strikes killed Iran’s Supreme Leader, but the rally cooled as investors weighed the risk of a global industrial slowdown. With the Strait of Hormuz effectively closed, 20% of the world's energy flow is under threat, potentially dampening demand for silver in electronics and solar energy. While gold remains near record highs, silver is feeling the squeeze of a "de-risking" event where traders sell profitable assets to cover losses in crashing stock markets. Recent US data showing higher production costs has traders scaling back bets on interest rate cuts, further supporting the dollar. Silver remains in a strong long-term trend, but the immediate path is clouded by the clash between its role as a refuge and its sensitivity to a stalled global economy.