Silver price declines as US-Iran talks suspension boosts Dollar haven appeal

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Silver (XAG/USD) trades lower around $74.60 per troy ounce on Monday at the time of writing, down 0.92% on the day.

Silver loses ground on Monday, with XAG/USD trading around $74.60, down 0.92% on the day.
The suspension of indirect talks between the US and Iran adds to geopolitical uncertainty in the Middle East.
The US Dollar remains the preferred safe-haven asset, limiting the appeal of the white metal.

Silver (XAG/USD) trades lower around $74.60 per troy ounce on Monday at the time of writing, down 0.92% on the day. The white metal is facing profit-taking after trading near its recent highs, as investors continue to favor the US Dollar (USD) as the primary safe-haven asset amid persistent tensions in the Middle East.

Market sentiment remains driven by developments in relations between Washington and Tehran. While hopes for a lasting agreement had initially supported precious metals earlier in the day, several developments have reignited concerns about the outcome of negotiations. According to Iran’s Tasnim news agency, the Iranian negotiating team has suspended message exchanges with the United States (US) through mediators in response to Israeli military operations in Lebanon.

Meanwhile, Iranian Foreign Minister Seyed Abbas Araghchi warned that any violation of the ceasefire between Iran and the US would be considered a breach of the truce across all regional fronts, including Lebanon. These comments come as negotiations remain deadlocked on several key issues, including Iran’s nuclear program and the future status of the Strait of Hormuz.

Despite the heightened geopolitical tensions, flows into precious metals remain limited. Investors continue to favor the US Dollar, which benefits from strong safe-haven demand. A stronger Greenback makes Silver more expensive for holders of other currencies, weighing on international demand for the metal.

At the same time, markets continue to monitor the potential impact of Middle East developments on energy prices. A sustained rise in Oil prices could fuel global inflationary pressures and strengthen expectations for monetary tightening by the Federal Reserve (Fed), a scenario that is generally unfavorable for non-yielding assets such as Silver.

Investors now await upcoming US labor market data, including the Nonfarm Payrolls (NFP) report due on Friday, for fresh clues on the future direction of Fed policy. Interest-rate expectations remain a key driver for Silver price action in the days ahead.

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.