Silver climbs above $60.00 despite US–Iran tensions, Fed minutes in focus

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Silver price (XAG/USD) attracts some buyers to near $60.35, snapping the two-day losing streak during the early European session on Wednesday. The white metal edges higher amid a softer US Dollar (USD) ahead of the release of the June FOMC meeting Minutes.

Silver price rises to around $60.35 in Wednesday’s early European session.
US and Iran exchanged fire after attacks in the Strait of Hormuz.
Traders await the June FOMC meeting Minutes later on Wednesday.

The US military launched a new wave of strikes against Iran on Tuesday following reports of attacks on three oil tankers in the Strait of Hormuz, jeopardizing the already fragile ceasefire.

“US Central Command forces have begun launching a series of powerful strikes against Iran to impose heavy costs for targeting and attacking commercial shipping crewed by innocent civilians in an international waterway,” Centcom said on Tuesday.

The latest developments could raise energy-driven inflationary fears and reaffirm the US Federal Reserve's (Fed) "higher for longer" policy stance, which would weigh on the white metal.

Traders are currently pricing in over an 80% probability that the Fed will deliver at least one 25 basis points (bps) rate hike by the end of this year, according to the CME Group's FedWatch tool.

The US central bank will release the Minutes from its June 16–17 policy meeting later in the day. However, the messages recorded in the Minutes happened before the US June Nonfarm Payrolls (NFP) report, which came in weaker than expected. Because the Fed Minutes reflect a labor market that still looked solid at mid-day June, any hawkish rhetoric might feel slightly outdated to current market pricing.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.