Silver Eases Following Recent Gains Amid Fed Uncertainty and Heightened Geopolitical Risks
- rabeelrana
Silver (XAG/USD) retreated modestly during Friday’s Asian trading session, currently quoted near $36.50 per troy ounce, following two consecutive days of gains. Despite the mild pullback, downside momentum may remain constrained owing to heightened macroeconomic and geopolitical uncertainties, particularly surrounding the independence of the U.S. Federal Reserve.
Market sentiment was unsettled after U.S. President Donald Trump, speaking on the sidelines of the NATO summit in The Hague, sharply criticized Federal Reserve Chair Jerome Powell, referring to him as “terrible.” Trump further indicated that he is considering multiple potential candidates to replace Powell, stating, “I know within three or four people whom I’m going to pick.” The possibility of an early announcement—potentially by September or October—has raised concerns over political interference in monetary policymaking, potentially undermining the Fed’s institutional autonomy.
In parallel, geopolitical risk continues to exert a cautious tone across financial markets. Iranian Foreign Minister Abbas Araghchi categorically dismissed any prospects of renewed nuclear negotiations with the United States. “No agreement or arrangement has been made to resume negotiations. Neither any promise has been given, nor any discussion has taken place on this matter,” he asserted, according to CNN. The statement diminishes hopes for a diplomatic resolution and may bolster safe-haven demand for precious metals.
On the macroeconomic front, the United States reported a first-quarter GDP contraction of 0.5%, exceeding both the prior estimate and consensus forecast of a 0.2% decline. While the weak growth data reinforces expectations for a more accommodative monetary stance from the Federal Reserve, these were partially offset by stronger-than-anticipated economic indicators. Weekly Initial Jobless Claims fell to a five-week low of 236,000, while Durable Goods Orders surged by 16.4%—the largest increase in over a decade—highlighting ongoing resilience in the industrial sector.
Investors now await the release of the core Personal Consumption Expenditures (PCE) inflation data, a key metric for the Fed’s policy calibration. Until then, silver prices are expected to remain responsive to evolving monetary policy signals and geopolitical developments, with prevailing uncertainties likely to limit further downside in the near term.
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Dollar Firms as Geopolitical Tensions Rise
- rabeelrana
The U.S. dollar edged higher on Monday as investors sought safety amid rising geopolitical tensions in the Middle East. However, the relatively restrained moves across currency markets suggest traders are in a holding pattern, awaiting Iran’s response to recent U.S. airstrikes on its nuclear facilities.
The most notable reaction was seen in the oil market, where crude prices surged to a five-month high following the strikes and comments from U.S. President Donald Trump, who hinted at the possibility of regime change in Iran. Meanwhile, global equity markets retreated as the conflict introduced renewed uncertainty for investors.
In foreign exchange markets, the euro slipped 0.33% to $1.1484, whiles the Australian dollar — often viewed as a proxy for global risk sentiment — dropped 0.67% to a one-month low of $0.6408. The dollar index, which measures the greenback against a basket of six major currencies, rose 0.12% to 99.037. Sterling also weakened, down 0.26% at $1.3416, while the New Zealand dollar fell 0.68% to $0.5926.
The U.S. dollar also gained against the Japanese yen, climbing 0.52% to 146.81 after touching a one-month high earlier in the session. The move put pressure on other Asian currencies, including the Indonesian rupiah, Malaysian ringgit, and Philippine peso.
Strategists at Bank of America noted that the USD/JPY pair could climb further if oil prices remain elevated, citing Japan’s heavy reliance on Middle Eastern energy imports, which account for over 90% of its petroleum needs. In contrast, the U.S. is largely energy self-sufficient. “USD/JPY offers a potential hedge against further geopolitical escalation, with the added benefit of positive carry,” the bank said.
Iran responded to the U.S. strikes by vowing to defend itself. The strikes, involving 30,000-pound bunker-buster bombs, targeted the mountainous region above the Fordow nuclear facility. In the U.S., the attacks sparked anti-war protests, even as government officials urged Iran to avoid further escalation.
In a potentially disruptive move, Iran’s parliament approved a proposal to close the Strait of Hormuz — a critical chokepoint for global oil flows, where nearly 25% of the world’s crude shipments pass through narrow waters shared with Oman and the UAE.
Despite the heightened tensions, markets appear to be treating the U.S. strikes as a contained event rather than the onset of a broader regional conflict. Although the dollar has regained some of its safe-haven appeal amid the geopolitical uncertainty, its modest gains reflect investor caution. Market participants appear hesitant to fully commit to the greenback until the situation becomes clearer.