Silver Price Forecast: XAG/USD rebounds to near $66.00 amid fading US-Iran talks optimism
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Silver may face challenges as inflation and interest rate fears are revived by mounting oil supply concerns.
President Trump threatened strikes on Iran if Hezbollah continues attacking Israel, clouding hopes for a US-Iran peace deal.
Hawkish Fed policy expectations could continue to weigh heavily on non-yielding Silver.
Silver price (XAG/USD) halts its three-day losing streak, trading around $65.90 per troy ounce during the Asian hours on Monday. However, Silver price could further decline amid renewed concerns over a US-Iran peace deal, a development that keeps both inflation risks and the prospect of prolonged high interest rates at the forefront of investor worries.
According to a CNBC report on Sunday, US President Donald Trump threatened direct strikes on Iran if Hezbollah continues its attacks on Israel. This warning has severely clouded the outlook for diplomatic progress between Washington and Tehran.
Furthermore, President Trump threatened to completely dismantle the current peace framework, even as Vice President JD Vance met with Iranian officials for the first round of talks under an interim deal.
Adding to the friction, Tehran simultaneously announced it had once again closed the strategic Strait of Hormuz. While Iranian state media reported that Tehran had completely suspended negotiations in response to Trump's remarks, sources close to the matter indicated that discussions are quietly ongoing.
The non-yielding Silver could face heavy pressure from expectations of tighter monetary policy. The Federal Reserve (Fed) kept interest rates steady last week but adopted a decidedly hawkish tone. Notably, 9 out of 19 Fed policymakers now project at least one interest rate hike this year, with market investors pricing in a potential increase as early as September.
"The resurgent US dollar, powered by the Fed's newly hawkish tone under Kevin Warsh, has stolen the spotlight," noted Tim Waterer, chief market analyst at KCM Trade, highlighting the growing headwinds facing precious metals.
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