Silver Falls on Stronger Dollar and Hawkish Fed

Silver fell below $65 per ounce on Friday, its lowest level since June 11, and was on track for a weekly loss of around 4.5% as a stronger US dollar and rising interest-rate expectations dampened demand for precious metals. The dollar climbed to a one-year high after the Federal Reserve left rates unchanged but struck a hawkish tone. Nine of the Fed’s 19 policymakers now expect at least one rate hike later this year, while markets are pricing in roughly a 70% chance of an increase by September. Higher-for-longer interest rates tend to reduce the appeal of non-yielding assets such as silver while supporting the dollar. Geopolitical uncertainty also remained elevated after Switzerland announced that planned US-Iran talks aimed at ending the Middle East conflict would not take place on Friday, clouding prospects for a lasting peace agreement.

Silver fell below $65 an ounce on Friday and was set to lose about 5% for the week, as hawkish signals from the US Federal Reserve outweighed the positive impact of the US-Iran peace agreement, which pushed oil prices lower and eased inflation concerns. On Wednesday, the Fed left interest rates unchanged as widely expected but indicated increasing support for interest rate hikes this year. Higher borrowing costs tend to reduce the appeal of non-yielding assets such as silver by increasing their opportunity cost. Meanwhile, investors welcomed signs of improving shipping conditions through the Strait of Hormuz after the US-Iran interim peace deal came into effect, ending a prolonged conflict that triggered the largest supply disruption on record. Still, traders remained cautious, with expectations that it could take months for shipping activity and energy flows to recover to levels seen before the conflict began in late February.

Silver climbed above $69 an ounce on Thursday, recovering losses from the previous session after President Donald Trump signed an interim agreement to end the conflict with Iran and reopen the Strait of Hormuz. Reports indicated that the deal includes the swift reopening of the strait and the removal of sanctions on Iranian oil exports, while negotiations on nuclear issues and potential additional economic incentives for Iran are set to continue. Meanwhile, silver tumbled about 3% on Wednesday after the US Federal Reserve signaled increasing support for interest rate hikes this year. Fed Chair Kevin Warsh refrained from providing guidance on the next policy move but stressed that inflation has remained above the central bank’s 2% target for several years and reiterated the Fed’s commitment to restoring price stability.