Silver price firms on US Dollar weakness amid easing US-Iran haven demand
- Silver edges higher amid hopes for a US-Iran agreement that is reducing safe-haven demand.
- The US Dollar remains under pressure following comments from US officials and stronger-than-expected consumer sentiment data.
- Negotiations on the nuclear issue are set to continue after the potential signing of a memorandum of understanding this weekend.
Silver (XAG/USD) trades around $67.50 on Friday at the time of writing, up 0.21% on the day. The white metal maintains a positive bias despite improving market sentiment driven by diplomatic progress between the United States (US) and Iran.
Investors remain focused on discussions between Washington and Tehran after Iran’s IRNA news agency released the main terms of the memorandum of understanding currently under negotiation. According to the reported terms, no agreement has been reached at this stage regarding the nuclear file, while negotiations on the issue are set to continue within a 60-day period after signing. The text also includes no Iranian commitment regarding the transfer of management of the Strait of Hormuz.
Optimism surrounding the potential signing of the memorandum as early as Sunday in Geneva is helping ease geopolitical concerns that had supported safe-haven flows in recent weeks. However, the absence of a definitive agreement on nuclear matters is keeping a degree of caution in financial markets.
Meanwhile, the US Dollar remains under pressure. US Vice President JD Vance stated that Iran would not receive any cash or released funds simply in exchange for signing an agreement, while also pushing back against what he described as false information surrounding the negotiations. These remarks accompanied a decline in the US Dollar (USD), with the US Dollar Index (DXY) falling toward the 99.75 area.
Market participants also digested an improvement in US consumer confidence. The preliminary University of Michigan Consumer Sentiment Index rose to 48.9 in June from 44.8 in May, beating market expectations of 46. At the same time, one-year inflation expectations eased to 4.6% from 4.8%, while five-year inflation expectations declined to 3.4% from 3.9%.
The weakness of the Greenback continues to support Dollar-denominated precious metals, including Silver, partly offsetting the negative impact of easing geopolitical tensions. Investors are now watching for further developments in US-Iran negotiations, which could influence both risk appetite and demand for safe-haven assets.
Silver FAQs
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.
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.
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.
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.