Silver Steady, Market Tests Whether De-escalation Is True

Silver prices (XAG/USD) moved relatively stable on Friday (May 29) in the European session after bouncing back from the previous day's pressure. Silver last traded around US$75.6 per troy ounce, indicating that the recovery remains limited and the market is not yet fully convinced that the rally can continue.

The main support came from hopes of easing geopolitical risks following reports of a preliminary US-Iran agreement to extend the ceasefire for 60 days and open talks on the nuclear program. The prospect of easing tensions typically reduces energy risk premiums, which in turn can alleviate inflation concerns and provide room for precious metals.

However, the market remains cautious as implementation details remain unclear and political decisions are not final. As long as the status of the Hormuz resumption and the stability of the ceasefire remain dependent on headlines, silver tends to move half-heartedly—bounce easily but also quickly lose steam.

From a fundamental perspective

From a fundamental perspective, the biggest burden remains the interest rate narrative. Since the conflict broke out in late February, an energy surge has boosted inflation and reinforced expectations of prolonged high interest rates, conditions that typically pressure non-yielding assets like silver. Therefore, despite improving sentiment, silver remains sensitive to dollar movements, yields, and Fed policy signals.

The market's next focus will be whether the de-escalation actually translates into a sustained reduction in energy risk, as well as whether inflation data and central bank officials' comments alter interest rate expectations. Without support from these fronts, silver risks returning to a tight consolidation pattern. (Arl)

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