Silver Slumps as Rate Fears Offset Safe-Haven Demand

Key Moments

Weak Silver Performance Despite Heightened Geopolitical Risk

Silver prices (XAG/USD) remained under pressure for a third consecutive session, changing hands around $55.50 per troy ounce during Asian trading on Thursday. The metal is on pace to decline more than 7% for the week, even as elevated tensions in the Middle East drive oil prices higher and stoke worries over inflation and interest rates.

The latest jump in energy costs has kept inflation dynamics and the outlook for monetary policy at the center of market attention, draining demand from non-yielding assets such as silver. The metal has struggled to attract a sustained safe-haven bid despite the broader geopolitical backdrop.

Middle East Escalation Raises Energy Supply Risks

According to Reuters, Iran has directed Yemen’s Houthi militia to be prepared to shut the key Red Sea oil corridor if the United States targets Iranian power infrastructure. Such a move would introduce a significant new risk to global energy flows.

Further aggravating supply concerns, the Tasnim news agency reported explosions in Bandar Abbas, Qeshm, and Ahvaz, while very loud blasts were also heard in Kuwait and as far away as Basra. These developments have intensified fears of possible disruptions to energy shipments and added to the upward pressure on oil prices.

These latest flashpoints follow comments made earlier in the week by US President Donald Trump, who said the United States would attack Iran’s bridges and power plants next week if Tehran does not return to negotiations.

Fed Path Unclear After Softer Inflation Data

This week’s weaker-than-anticipated US inflation readings have effectively removed the possibility of a July interest rate increase. Nonetheless, Federal Reserve Chair Kevin Warsh has reiterated his strong focus on combatting inflation and bringing prices back under control.

Despite the diminished odds of near-term tightening, market participants remain deeply split over whether the Fed will restart rate hikes in September. That policy uncertainty continues to act as a headwind for silver, leaving non-yielding metals under continued pressure.

Silver as an Investment Instrument

Silver is a widely traded precious metal that has historically served as both a store of value and a medium of exchange. Although it is generally less prominent than gold in global portfolios, some investors use silver to diversify holdings, gain exposure to its intrinsic value, or as a potential hedge during periods of elevated inflation. Access to the metal ranges from physical holdings such as coins and bars to market-based vehicles like Exchange Traded Funds that track its price.