Silver price declines as stronger Dollar, US-Iran tensions weigh on precious metals

LONDON (June 3) Silver (XAG/USD) trades around $74.50 on Wednesday at the time of writing, down 0.88% on the day. The white metal is facing selling pressure as the US Dollar (USD) continues to recover, supported by escalating geopolitical tensions in the Middle East.

The Silver market is being driven by the latest developments between the United States (US) and Iran. According to the US Central Command (CENTCOM), US forces intercepted several Iranian missiles and drones targeting regional facilities before carrying out defensive strikes against Iranian positions. This escalation has allowed Oil prices to extend their rebound and has reignited concerns about global inflationary pressures.

Higher energy prices tend to fuel inflation expectations, which in turn reduces market expectations for rapid monetary easing by the Federal Reserve (Fed). Against this backdrop, precious metals, which do not offer yields, lose some of their attractiveness among investors.

Market sentiment has also been influenced by the latest US labor market data. The Job Openings and Labor Turnover Survey (JOLTS) showed that job openings rose to 7.618M in April, significantly above market expectations of 6.88M. The data points to continued resilience in the US labor market and supports the view that the central bank may maintain a cautious stance regarding interest rate cuts.

Meanwhile, US President Donald Trump said on Wednesday that Iran had agreed not to pursue nuclear weapons and indicated that negotiations between Washington and Tehran remain ongoing with the involvement of Iran’s Supreme Leader. Despite these comments, investors remain cautious as the geopolitical situation continues to evolve.

Market attention now turns to the May Nonfarm Payrolls (NFP) report due on Friday.

FXStreet