Silver prices rallied sharply on Monday, climbing nearly 4% to trade around $70.76 per troy ounce, as a softer U.S. dollar and declining oil prices provided a tailwind for precious metals. The move marks a significant rebound from recent selling pressure, though the metal remains down roughly 9% for the month.
Spot silver (XAG/USD) was last seen at $70.69, up 3.91% from Friday's close, according to FXStreet. Reuters reported a slightly higher level of $70.76, representing a 4.1% gain. The advance came as the dollar index slipped and crude oil prices dropped on early-stage U.S.-Iran peace talks, which reduced safe-haven demand for the greenback.
Fed Policy in Focus
The next major catalyst for silver and silver-linked assets is the Federal Reserve's policy meeting scheduled for June 16-17. Market participants are keenly awaiting the central bank's statement, updated economic projections, and Fed Chair Kevin Warsh's press conference for signals on the future path of interest rates.
According to Reuters, rate hike expectations for December have declined following the peace deal developments. UBS analyst Giovanni Staunovo noted that "some consolidation" is likely before fresh Fed commentary this week. The Fed is widely expected to hold rates at the current 3.50%-3.75% range, but investors will scrutinize the statement for any hints of a potential rate cut later this year.
Silver's Dual Nature
Silver occupies a unique position as both an industrial metal and a precious metal, making it sensitive to shifts in economic growth, inflation, and monetary policy. When spot prices rise, silver-tracking ETFs like the iShares Silver Trust (SLV) and mining stocks often follow suit, as higher prices directly boost revenue and margins for producers.
However, the same dynamics can work in reverse: a strengthening dollar or hawkish Fed stance could quickly pressure silver lower. Since silver offers no yield, rising interest rates make cash and bonds more attractive relative to the metal.
Price Action and Volatility
Monday's bounce came after a stretch of selling in metals. Trading Economics data shows silver is still down nearly 9% for the month, though it remains more than 90% above last year's price. On Investing.com, XAG/USD traded around $70.70 after moving from an intraday low of $68.00 to a high of $70.86. The 52-week range spans from $35.28 to $121.67, underscoring the metal's extreme volatility.
Such price swings make silver a challenging trade for short-term speculators, but bulls point to the weak dollar, lower oil prices, and potential for Fed easing as reasons to favor hard assets.
Market Skepticism
Despite Monday's gains, some analysts caution that the rally after clearing $70 may be overextended. Inflation remains above the Fed's target, and the central bank may maintain a cautious stance. Skeptics argue that new buyers have yet to step in, and any hawkish surprise from the Fed or renewed dollar strength could reverse the move quickly.
The Fed's meeting schedule includes the release of economic projections and a policy statement at 2:00 p.m. Eastern on June 17, followed by Chair Warsh's press conference at 2:30 p.m. Any signs of easier policy or moderating inflation could fuel another leg higher for silver, while a tough stance or stronger dollar would likely pressure the metal and related equities.
