Silver prices staged a recovery on Thursday, climbing back to around $64.00 per troy ounce during Asian trading after hitting an 11-week low of $61.50. The rebound was driven by a resurgence in safe-haven demand following fresh US airstrikes on Iran, which heightened geopolitical risks and stoked inflation fears. Industrial buying, tied to silver's use in electronics, solar panels, and electric vehicles, also contributed to the bounce.
The metal had fallen for two consecutive sessions before finding support near the $61.50 level, where short-covering and renewed positioning by traders helped stabilize prices. However, the recovery remains fragile as investors weigh the dual impact of Middle East tensions and a hawkish Federal Reserve outlook.
Geopolitical Tensions Fuel Safe-Haven Flows
The US Central Command confirmed airstrikes in Iran on Wednesday, describing them as a response to continued aggression after an American helicopter was shot down. Iran retaliated against US military facilities in Bahrain, Jordan, and Kuwait, prompting President Donald Trump to warn of severe consequences if an interim peace agreement is not reached. Iranian officials have vowed not to back down, raising the risk of a broader conflict.
For commodities, the primary concern is energy. Any prolonged disruption in the Middle East could push oil prices higher, feeding into transport and production costs and complicating the inflation outlook. This has kept traders cautious, even as safe-haven demand has supported precious metals like silver and gold. For context, gold slipped below $4,040 earlier this week as oil gains revived fears of Fed rate hikes.
Silver's Dual Role Offers Support, but Limits Upside
Silver occupies a unique position in global markets, acting as both a defensive asset during stress and a key industrial input. This dual role helped stabilize prices after the sharp decline, but it also means the metal is sensitive to both geopolitical developments and economic data. While safe-haven demand can lift silver, a stronger rate outlook—driven by persistent inflation—tends to hurt non-yielding assets like precious metals.
Markets are now awaiting the May Producer Price Index (PPI) and initial jobless claims, which could shape expectations for the Federal Reserve's next policy move. Traders have modestly trimmed rate-hike expectations, but a quarter-point increase by December remains fully priced in. This leaves silver caught between geopolitical stress that supports havens and a higher-for-longer rate environment that limits its appeal.
Industrial Demand and Clean Energy Tailwinds
Beyond safe-haven flows, silver's industrial applications provide a floor for prices. The metal is a critical component in solar panels, electronics, and electric vehicles, sectors that continue to see strong demand growth. This industrial link helped silver recover from its lows, as buyers stepped in to defend the $61.50 level. However, the upside may be capped unless inflation data surprises to the downside, easing pressure on the Fed.
For now, silver's rebound suggests that traders are willing to buy on dips, but the next move hinges on US inflation data. If the PPI report reinforces the case for tighter Fed policy, silver could struggle to extend its recovery. Conversely, a softer reading could give precious metals room to rally, especially if geopolitical tensions persist.
This article is for informational purposes only and does not constitute financial advice.
