Optimistic Investors, Silver Rebounds

Silver prices rose above $78 per ounce during the European session (May 25), as the white metal recovered from last week's pressure following growing optimism about a possible deal between the United States and Iran. Spot silver traded in the range of around $77.8–$78.5 per ounce after a strong rebound from its lows, reflecting improved market sentiment regarding inflation risks.

Investors are increasingly confident that negotiations could result in a deal that includes reopening the Strait of Hormuz, a cessation of hostilities, and the release of some frozen Iranian assets—steps that could ease concerns about energy volatility and internasional price pressures. However, the blockade of the Strait of Hormuz will not be lifted until a formal agreement is reached, so market sentiment remains cautious.

Despite the rebound, silver remains about 17% lower since the Middle East conflict began, due to concerns that energy shocks could trigger a wave of inflation and prompt central banks to maintain or tighten monetary policy. Expectations of interest rate hikes remain strong in the market due to persistently high inflation data and energy prices.

In the dynamics of monetary policy

In the dynamics of monetary policy, Federal Reserve members such as Governor Christopher Waller have hinted that the central bank may need to remove the easing bias in its policy guidance—a signal that the chances of an interest rate cut are diminishing and that a hike could remain relevant if inflation remains high.

Market sentiment currently remains focused on two main factors: developments in the US-Iran negotiations, which could restore mancanegara energy flows, and the direction of US interest rate policy, which is heavily influenced by inflation risks. These two factors will determine whether silver can maintain its upward momentum or come under further pressure in the coming sessions. (Arl)

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