Silver Falls Below $60 as Fed Tightening Fears Grow

Silver slipped below $60 an ounce on Friday, ending the week down about 4%, as rising crude oil prices and escalating US-Iran tensions fueled expectations that the Federal Reserve will keep monetary policy tight for longer. Oil jumped 5% this week after renewed strikes between US and Iranian forces, amplifying inflation concerns and leading markets to price in a near 60% chance of a September Fed rate hike. Investors will now focus on US inflation data due next week and Fed Chair Kevin Warsh’s testimony for further policy signals. Minutes from the Fed’s June meeting showed growing unease over inflation, with some policymakers having pushed for a rate hike before rates were left unchanged.

Silver steadied near $60 an ounce on Friday, but was still on track to end the week lower as investors continued to assess developments in the Middle East and their potential impact on inflation and monetary policy. Reports indicated that the US and Iran will continue peace talks despite a recent escalation in hostilities that disrupted energy flows through the Strait of Hormuz and renewed concerns over inflation. US forces carried out strikes on targets in Iran over two days in response to recent attacks on vessels in Hormuz, prompting retaliatory strikes by Tehran on US bases across the region. Markets continue to expect the Federal Reserve to raise interest rates at least once this year, although the policy outlook remains highly uncertain. Meanwhile, New York Fed President John Williams said that, among the factors driving inflation in the US, he is most focused on demand fueled by artificial intelligence.

Silver rose to around $59 an ounce on Thursday, supported by a weaker US dollar, although gains remained limited as investors monitored escalating tensions in the Middle East and their potential impact on inflation and interest rates. The US military said it launched fresh strikes on Iran on Wednesday, prompting retaliatory attacks on Kuwait and Bahrain and raising regional tensions. However, US President Donald Trump said Iran had reached out seeking a deal, easing fears of a broader conflict. Meanwhile, minutes from the Federal Reserve's latest meeting revealed growing concern over inflation, with several policymakers arguing that a rate hike could be warranted before rates were ultimately left unchanged last month. Markets are now pricing in a 63% chance of a September rate hike. Investors are now awaiting next week's US inflation report and Federal Reserve Chair Kevin Warsh's congressional testimony for further clues on the policy outlook.