In early European trading on Tuesday, the price of silver (XAG/USD) continued its downward trajectory for the second consecutive day, hovering around $26.95. The easing concerns regarding wider tensions in the Middle East have bolstered market sentiment, exerting downward pressure on the precious metal. Traders are exercising caution, opting to remain on the sidelines ahead of the release of the US preliminary S&P Global Purchasing Managers Index (PMI) data for April later in the day.
The silver price has experienced a sharp decline to nearly three-week lows as fears of a potential broader conflict in the Middle East diminish. This shift has prompted traders to reduce their positions in precious metals and favor riskier assets. Statements from Iranian Foreign Minister Hossein Amirabdollahian indicating Iran’s lack of intention to retaliate against Israel’s strike, coupled with the silence from Israeli authorities, suggest efforts to de-escalate tensions between the two nations.
Furthermore, the diminished expectations for interest rate cuts by the US Federal Reserve (Fed), amidst robust US economic data and hawkish remarks from policymakers, have provided support to the US dollar (USD) and weighed on silver prices. New York Fed President John Williams and Chicago Fed President Austan Goolsbee both emphasized the strength of the US economy, indicating a reluctance to implement rate cuts in the near term.
The prevailing narrative of higher interest rates in the US may dampen demand for silver, given its status as a non-interest-bearing asset. Market expectations for rate cuts in June and July have significantly declined, with the probability of a September cut also decreasing, according to the CME FedWatch Tool.
As the market awaits further economic indicators and central bank policy decisions, silver prices are likely to remain under pressure, influenced by geopolitical developments and shifts in the US dollar’s strength. Traders will closely monitor any developments in the Middle East and the Federal Reserve’s stance on monetary policy for cues regarding the future direction of silver prices.
