Silver climbs near $57 as geopolitical turmoil offsets Fed rate hike fears

Silver rallied to near $57 per ounce on Monday, gaining 2% as escalating US-Iran hostilities drove safe-haven demand and pushed oil prices above $90 a barrel, overshadowing rising expectations for a Federal Reserve rate hike in September.

"Geopolitical risk from the US-Iran conflict is overwhelming the rate narrative for now, but the upside in silver remains capped as long as the Fed maintains a hawkish posture," Kaynat Chainwala, AVP Commodity Research at Kotak Securities, said.

Spot silver traded at $57.02 as of the London morning session, recovering from $56.70 — its weakest since November 2025 — after losing 7% in the prior week. COMEX gold edged up 0.12% to $4,021 per ounce but remained near a nine-month low. The rally in precious metals came as Brent crude breached $90 a barrel for the first time since June, up 27.8% from its July 1 low, after the US carried out an eighth consecutive night of airstrikes against Iranian military infrastructure and Iran retaliated against US allies in the Gulf, including strikes on a Kuwaiti power plant and oil facility.

The Federal Reserve is now the primary headwind for silver. Markets priced in a 53% probability of a rate hike at the September meeting, up from 47% a day earlier, according to Trading Economics. Cleveland Fed President Beth Hammack joined a growing list of officials warning about persistent inflation, as oil's 30% surge from July lows threatens to keep price pressures elevated. Higher rates reduce the appeal of non-yielding assets like silver and gold. The metal's next major test is the $57.50 resistance level; a break above that could trigger further short-covering, while a failure to hold $56 would open the door to a retest of the November 2025 low near $54.

Supply and demand dynamics offer a mixed picture. Silver's industrial demand — which accounts for more than half of global consumption — faces headwinds from a slowing manufacturing cycle, while investment demand through exchange-traded products has been volatile. COMEX silver inventories stood at 296 million ounces as of mid-July, according to exchange data, providing ample physical cover. On the supply side, global silver mine output is projected to decline 2% in 2026 to 820 million ounces, the lowest in four years, according to the Silver Institute, which could provide a floor under prices if industrial demand stabilizes.

The immediate catalyst for silver remains the trajectory of the US-Iran conflict. Any diplomatic breakthrough that lowers oil prices would remove the inflation impulse driving rate-hike expectations, potentially allowing silver to rally toward $60. Conversely, further escalation that pushes Brent above $95 would reinforce the higher-for-longer rate narrative and keep silver capped below $57.50. The next key data point is the US core PCE inflation release on July 31, which will shape Fed expectations heading into the September meeting.

This article is for informational purposes only and does not constitute investment advice.