Silver Crashes 4% on Inflation Fears

Silver plunged over 4% to $72 per ounce on Tuesday, its lowest since late March, as surging oil prices and stalled US-Iran talks amplified inflation concerns ahead of pivotal central bank meetings. A US official confirmed that President Donald Trump dismissed Iran’s latest proposal, dashing hopes for a quick end to the conflict that has disrupted energy markets and stoked inflation, raising the prospect of higher interest rates. Though precious metals typically serve as inflation hedges, rising rates erode their appeal as non-yielding assets. The US Federal Reserve is poised to hold rates steady, possibly in Jerome Powell’s final meeting as chair, with markets parsing signals on future policy. Meanwhile, the Bank of Japan maintained rates in a split vote, while other major central banks are expected to pause this week but strike a more hawkish tone, signaling potential tightening ahead.

Silver dropped below $74 an ounce on Tuesday, extending losses from the previous session as investors assessed renewed diplomatic efforts to resolve the US–Iran conflict, which has triggered an energy supply shock and intensified inflation concerns. Tehran reportedly delivered a fresh proposal to Washington through Pakistani mediators, offering to reopen the Strait of Hormuz if the US lifts its blockade, while deferring talks on Iran’s nuclear program. The US remains cautious about the proposal and is expected to respond with counteroffers in the coming days, with Tehran’s nuclear ambitions continuing to be a major sticking point. Investors are also looking ahead to policy decisions from key central banks this week, including the Fed, ECB, and BOJ. Elevated energy prices driven by the Middle East conflict have fueled inflation fears and increased expectations that central banks may keep interest rates higher for longer or even tighten further, weighing on non-yielding precious metals.

Silver traded near $75.6 per ounce on Monday, stabilizing after a more than 6% drop the previous week, as investors remained cautious ahead of stalled US-Iran peace talks and a packed week of economic data and central bank meetings. Reports suggest Iran submitted a new proposal to the US to reopen the Strait of Hormuz and ease tensions, after US President Donald Trump canceled a planned diplomatic trip to Islamabad. The ongoing impasse has driven oil prices higher, intensifying inflation worries and reinforcing expectations that central banks may hold or even increase interest rates to combat rising price pressures. While major central banks, including the Federal Reserve, are widely expected to leave rates unchanged this week, markets will scrutinize any hints of heightened concern over inflation risks tied to the US-Iran conflict.