Silver price rises on US-Iran diplomatic progress, upside capped by hawkish Fed

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Silver (XAG/USD) trades around $65.90 at the time of writing on Monday, up 1.69% on the day and snapping a three-day losing streak. The white metal is attracting renewed investor interest as markets assess the implications of diplomatic progress between the United States (US) and Iran.

Silver gains nearly 1.7% and holds around $66.00 amid diplomatic progress between the US and Iran.
Lower Oil prices help ease concerns about an energy-driven inflation shock.
Expectations of a more hawkish Fed continue to cap the precious metal’s upside potential.

Support for Silver comes after Qatar and Pakistan announced that Washington and Tehran have agreed to a formal roadmap aimed at reaching a final peace agreement within the next 60 days. The development has helped push Oil prices lower and ease concerns about a renewed energy-driven inflation surge, a factor that had recently fueled volatility across financial markets.

Iranian Foreign Minister Abbas Araqchi also confirmed several breakthroughs in the negotiations, including waivers for Oil and petrochemical exports, the release of part of Iran’s frozen financial assets, and the launch of a broader economic reconstruction program.

However, the geopolitical outlook remains uncertain. US President Donald Trump warned on Sunday that the United States could carry out direct strikes against Iran if Tehran-backed groups launch further attacks on Israel. The threat continues to encourage a degree of caution among investors despite the diplomatic progress reported so far.

Meanwhile, Silver’s gains could remain limited by shifting monetary policy expectations. Last week, the Federal Reserve (Fed) left interest rates unchanged while delivering a more hawkish message. Updated projections showed that nine of the nineteen members of the Federal Open Market Committee (FOMC) now expect at least one rate hike this year.

This shift has led markets to consider the possibility of a rate increase as early as September. In this environment, higher US Treasury yields and a resilient US Dollar (USD) could reduce the appeal of non-yielding assets such as Silver, even as ongoing geopolitical uncertainties continue to support demand for precious metals.

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.