Silver Slides Below $75 as US-Iran Peace Deal Hopes Dim

Silver fell back below $75 an ounce on Thursday as hopes for a US-Iran peace deal diminished following reports that Iran’s Supreme Leader Ayatollah Mojtaba Khamenei issued a directive ordering the country’s uranium to remain on Iranian soil. The move contradicted Israeli officials’ assertions that Iran’s highly enriched uranium would need to be transferred out of the country as part of any peace deal, according to Reuters. Meanwhile, Iran is reportedly restoring its military capacity at a faster pace than expected, stoking fears of a renewed conflict in the Middle East. The prospect of a prolonged conflict sent oil prices back toward four-year highs, adding to inflation concerns and raising expectations that central banks may need to tighten monetary policy. Also, minutes from the Federal Reserve’s latest policy meeting showed that most officials believe a rate increase this year could still be warranted if inflation remains above the Fed’s 2% target.

Silver held above $75 an ounce on Thursday after gaining about 3% in the previous session, supported by growing optimism that an imminent peace agreement between the US and Iran could ease inflationary pressures and reduce concerns over interest rate hikes. President Donald Trump said the US was in the final stages of negotiations with Iran, fueling expectations that the strategically important Strait of Hormuz may soon reopen. The prospect of restored shipping flows triggered a sharp decline in oil prices, helping temper inflation fears and lowering expectations that central banks will need to tighten monetary policy. At the same time, minutes from the Federal Reserve’s latest policy meeting showed that most officials believe a rate increase this year could still be warranted if inflation remains above the Fed’s 2% target. Investors remain divided on whether the central bank will raise rates by December or leave borrowing costs unchanged through year-end.

Silver climbed above $76 an ounce on Wednesday amid growing hopes that the US-Iran conflict could soon be resolved, after reports indicated that President Trump said a deal with Iran was in its “final stages”. The prospect of easing geopolitical tensions helped push oil prices lower for a second consecutive session, fueling expectations that the inflationary impact of the recent energy shock may remain contained and reducing pressure on central banks to raise interest rates further. Those expectations persisted despite minutes from the Fed’s April FOMC meeting showing that a majority of policymakers believe additional rate hikes could be necessary if inflation remains persistently above the Fed’s 2% target. Still, markets broadly expect the Fed to keep interest rates unchanged for the remainder of the year, although traders currently see roughly a 50% chance of a rate hike in December.