Silver Falls Toward 11-Month Lows as Geopolitics Shift

Key Moments

Geopolitical Tension Weighs on Silver Prices

Silver (XAG/USD) is losing ground after recording slight gains in the prior session, with prices trading around $50.30 per troy ounce during Asian hours on Tuesday. The metal is fluctuating close to the 11-month low of $48.87 per ounce, a level reached on October 30, as investors react to renewed geopolitical risks and energy market jitters.

Market sentiment has been rattled by reports of a United States (US) military operation on Iran’s Qeshm Island, which has heightened concerns about oil supply disruptions and broader instability in the Middle East. These developments are adding another layer of pressure to an already fragile precious metals complex.

Details of Reported US Operations and Iranian Response

According to a report from the Wall Street Journal citing US officials, the action on Monday is described as part of a covert series of limited strikes carried out by Washington against Iranian targets in recent weeks. The reported military activity follows comments from US President Donald Trump, who had recently downplayed the likelihood of a full-scale return to war with Iran after Tuesday’s midterm elections.

On the other side, Iranian state outlet Press TV reported that Iran’s Islamic Revolutionary Guard Corps (IRGC) intercepted and brought down two US MQM-170 drones south of Qeshm Island in the Strait of Hormuz. The same report said that a 55th US MQ-9 drone was destroyed east of the strategic waterway.

Macro Backdrop: Inflation, Rates, and Precious Metals

Precious metals, including Silver, have faced sustained selling pressure over the course of the year. Ongoing hostilities in the Middle East have pushed energy costs higher, reinforcing inflation concerns across major economies. In response, central banks have held a firm, hawkish policy stance.

Based on pricing from the CME FedWatch Tool, markets are currently assigning roughly a 73% probability to a US Federal Reserve interest rate increase in December. This expectation of tighter monetary policy continues to be a headwind for non-yielding assets such as Silver.

Risk Assets Under Pressure Ahead of US Midterms

Beyond geopolitical developments, a broad-based sell-off in technology and artificial intelligence equities has sparked widespread de-risking across global markets. Forced liquidations and reduced risk appetite have spilled over into precious metals, adding to the downside in Silver.

At the same time, investors are watching the US midterm elections, with the Trump administration and the Republican Party facing intensifying political pressure over elevated energy prices and persistent inflation worries. The electoral outcome is seen as a potential catalyst for both policy direction and market volatility.

Political Outlook: Democrats Seen Gaining Ground

Strategists at Brown Brothers Harriman highlight that focus has increasingly shifted to Tuesday’s US midterm elections, as political expectations move in favor of the Democratic Party. They stress that “Democrats are widely expected to win the House of Representatives,” while “Senate control is much closer, but the tide favors the Democratic Party,” signaling the possibility of a change in the balance of power in Congress.