Silver jumps 4% as US dollar slides on US-Iran framework deal

Silver prices surged as the US dollar hit a one-week low after the US-Iran framework deal, with traders eyeing the Fed's next rate decision.

Silver rallied 4 percent Monday as the dollar index slipped to 99.5, a one-week low, after the US and Iran agreed on a peace framework.

The dollar index fell to 99.5 after dropping to a one-week low following the US-Iran announcement, market data show. A weaker dollar typically boosts demand for dollar-denominated commodities among global investors.

Gold also advanced, trading above $4,300 an ounce. On the MCX, silver futures for July delivery climbed as much as 3 percent to Rs 2,53,345 per kilogram, while gold futures for August delivery jumped 2.19 percent to an intraday high of Rs 1,53,829 per 10 grams. Silver later traded at Rs 2,51,692 per kilogram, up Rs 5,500 or 2.24 percent from the previous session. Gold on the MCX settled at Rs 1,52,774 per 10 grams, up Rs 2,246 or 1.49 percent. Silver's percentage gain outpaced gold on both the COMEX and MCX, reflecting the metal's higher sensitivity to shifts in dollar and rate expectations.

The US-Iran peace agreement, expected to be formally signed on June 19, also pushed crude oil prices sharply lower. WTI dropped more than 5 percent to around $80 a barrel, and Brent declined nearly 4 percent to about $83. The reopening of the Hormuz Strait lifted broader market sentiment, though analysts see months before trade fully recovers. The broader commodities complex also benefited from the weaker dollar, with industrial metals posting gains alongside precious metals. Investor attention is now shifting from geopolitics to the Federal Reserve's upcoming rate decision, which could determine whether silver's rally extends or reverses.

Fed Rate Decision Tests Silver's Rally

Markets are now pricing in a higher probability of rate cuts after the sharp decline in oil prices, which could ease inflationary pressures. Lower interest rates reduce the opportunity cost of holding non-yielding assets like silver and gold, providing further support for precious metals. The Fed's decision, expected later this month, will be the next major test for silver's upward momentum.

Silver's outperformance relative to gold reflects its dual role as both a monetary metal and an industrial commodity. The metal's industrial applications in solar panel manufacturing, electronics, and automotive components have strengthened its demand outlook, supporting prices beyond the macro-driven rally. Silver has historically shown higher volatility than gold during periods of monetary policy shifts, with gains accelerating when the dollar weakens and rate cut expectations rise.

The sharp drop in oil prices following the US-Iran deal has added a deflationary tailwind for precious metals. Lower energy costs reduce production expenses for silver miners and improve margins across the sector. For investors, the combination of a weaker dollar, falling crude prices, and potential Fed rate cuts creates a favorable macro backdrop for silver, though a hawkish surprise from the central bank could reverse the gains quickly.

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