Silver advanced on Tuesday, as traders assessed the possibility of a return to peace negotiations between the US and Iran.
Hopes that diplomacy could reduce disruptions to global energy markets could ease inflation concerns, which could cap bond yields and provide support for non-yielding assets such as silver.
However, the geopolitical backdrop remains fragile.
Tensions between Washington and Tehran persist, while Yemen’s Iran-backed Houthis announced a naval blockade targeting Saudi Arabia, raising the risk of further disruptions to regional energy supplies.
Any renewed escalation could quickly reverse the recent improvement in sentiment, lifting oil prices, strengthening inflation expectations, and pushing global yields higher. As a result, silver is likely to remain highly sensitive to geopolitical developments in the coming days.
Attention is also turning to central bank meetings, interest rate decisions, and guidance. The Federal Reserve and the European Central Bank are expected to leave interest rates unchanged this month, which could limit the pressure on silver to some extent in the near term. However, rate hikes are still expected after that, which could support bond yields and limit the upside for non-yielding assets.
On the physical side, the longer-term backdrop remains constructive. The global silver market is still projected to record a sixth consecutive annual supply deficit, providing structural support to prices.
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