Silver Holds Decline on Inflation Worries

Silver erased earlier losses to jump to $78 an ounce on Monday, attempting to recover from a 12% weekly slump as investors focused on potential progress in resolving the Iran conflict. Despite US President Donald Trump’s calls for Iran to act quickly, unconfirmed reports suggested a possible breakthrough, with the US reportedly lifting sanctions on Iranian oil and Tehran agreeing to a long-term freeze of its nuclear program. The metal had come under pressure from a stronger US dollar and rising Treasury yields after hotter-than-expected US inflation data led investors to rule out Federal Reserve rate cuts this year, while fueling speculation of a possible rate hike before year-end. UBS strategists also slashed their full-year silver investment demand forecast to 300 million ounces from over 400 million ounces and projected the global silver market deficit to shrink significantly to around 60–70 million ounces, down from a previous estimate of roughly 300 million ounces.

Silver held below $76 an ounce on Monday. sliding for the third straight session as growing signs that the Middle East-driven energy price shock is spilling over into broader inflation trends reinforced expectations for tighter central bank policy. The metal also faced pressure from a stronger US dollar and rising Treasury yields after hotter-than-expected US inflation data prompted investors to rule out any Federal Reserve rate cuts this year, while also increasing bets that policymakers could still deliver a rate hike before year-end. Further weighing on sentiment, UBS strategists sharply lowered their full-year silver investment demand forecast to 300 million ounces from more than 400 million ounces, citing softer industrial demand and rising mine supply. The bank also projected the global silver market deficit to narrow significantly to around 60–70 million ounces, compared with an earlier estimate of roughly 300 million ounces.

Silver dropped more than 8% to $76 an ounce on Friday, extending losses for a second consecutive session, as concerns over rising US inflation and potential rate hikes weighed on the market. Recent data revealed that US producer, import, and export prices rose at their fastest pace since 2022 in April, while annual inflation reached its highest level since 2023, due to the prolonged Iran war and the ongoing closure of the Strait of Hormuz. Markets have now fully priced out the chance of a Federal Reserve rate cut this year, with some traders even wagering on a potential hike by December. Adding to the pressure, UBS strategists slashed their full-year investment demand from over 400 million ounces to 300 million ounces, amid weaker industrial usage, and increased mine supply. The bank also expects the silver market’s supply deficit to shrink dramatically to around 60–70 million ounces, down from a previous estimate of 300 million ounces.