Silver Drops as Rate Hike Fears Weigh on Markets

Silver reversed early gains to trade below $75 an ounce in the first June session, remaining far from the two-month peak of $89.4 seen in mid-May. Rising oil prices, spurred by fresh Iran-US strikes and Iran’s suspension of communications with the US over Israel’s attacks on Lebanon, fueled inflation concerns and reinforced expectations of prolonged higher interest rates. Over the weekend, both sides exchanged proposals to revise a draft deal aimed at extending the ceasefire and reopening the Strait of Hormuz, though meaningful progress remains uncertain. Traders now see a roughly 60% chance of at least one US rate hike by year-end. Attention also shifts to this week’s US jobs data and upcoming remarks from Federal Reserve officials.

Silver steadied above $75 an ounce on Monday following a volatile week, as efforts to secure a longer-term ceasefire agreement between the US and Iran showed limited signs of progress. Over the weekend, Washington and Tehran exchanged proposals seeking amendments to a draft accord that would extend the ceasefire and reopen the Strait of Hormuz, though it remained uncertain whether the negotiations were moving closer to a resolution. President Donald Trump also reiterated his call for Iran to halt its nuclear program and fully restore the strait’s status as an open international waterway. Silver has faced headwinds since late February as the Middle East conflict drove energy prices sharply higher, fueling concerns about inflationary pressures and the prospect of interest rate hikes. Investors are now awaiting the latest US monthly jobs report later this week, which could offer fresh insight into labor market strength and the likely path of Federal Reserve policy.

Silver rose to $76 an ounce on Friday and was on track for an over 3% monthly gain, as investors balanced reports of a potential US-Iran ceasefire extension against persistent inflation concerns and expectations of prolonged higher interest rates. Negotiations to end the three-month war continued, with reports of a tentative 60-day ceasefire extension awaiting President Trump’s approval. However, disruptions to shipping and energy infrastructure could keep oil prices elevated, maintaining the Federal Reserve’s cautious stance. US inflation data this month showed the fastest rise in three years in April, reinforcing expectations that the Fed will keep rates unchanged well into 2027. UBS recently revised down its silver supply deficit forecast to 60–70 million ounces from 300 million ounces and cut its full-year investment demand outlook to 300 million ounces from over 400 million ounces.