Silver (XAG/USD) trades on a firm footing on Tuesday, hovering around $89.55 at the time of writing, up 2.90% on the day. The white metal benefits from a more supportive backdrop for non-yielding assets as the US Dollar (USD) weakens and US Treasury yields move lower, boosting demand for precious metals.
The pullback in the Greenback comes as markets continue to price in potential monetary easing from the Federal Reserve (Fed) in the second half of the year. According to the CME FedWatch tool, investors currently see a 43.4% chance that the Fed could deliver its first interest rate cut of the year in July, while the odds of a move as early as June stand near 37%. Lower interest rates tend to support non-yielding assets such as Silver.
At the same time, a sharp decline in Oil prices is helping to ease inflation concerns. The G7 confirmed its readiness to take “necessary measures” to support global energy supplies, according to Japan’s Industry Minister Yoji Muto Akazawa, quoted by Reuters on Tuesday. These developments reinforce the view that price pressures could moderate in the coming months. This also strengthens expectations of monetary easing, providing additional support for precious metals.
On the geopolitical front, market sentiment remains cautious as the conflict between the United States (US) and Iran enters its eleventh day. Airstrikes continue to be reported across the Middle East, while tensions around the Strait of Hormuz remain elevated. This uncertain backdrop continues to support safe-haven demand for assets such as Silver.
Looking ahead, investors are focusing on upcoming US macroeconomic releases, particularly the Consumer Price Index (CPI) due on Wednesday and the Personal Consumption Expenditures (PCE) Price Index scheduled for Friday, both key indicators for the Fed’s monetary policy outlook.
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