Silver prices moved steadily in the European session on Thursday (June 17th) after a nearly 3% correction in the previous trading session. XAG/USD hovered around $68.2 to $68.5 per ounce, with a daily range of $67.87 to $69.85, as the market weighed the impact of the Federal Reserve's hawkish signals and developments in the US-Iran deal.

The main pressure on silver came from the outlook for US interest rates. The Fed kept rates unchanged but signaled that a hike was still possible this year as inflation remained above target. Nine of the Fed's 19 policymakers see the need for a rate hike this year, while the odds of a December hike have risen to around 84%.

As a non-yielding asset, silver tends to be under pressure when interest rate expectations and the US dollar strengthen. Higher interest rates increase the opportunity cost of holding the precious metal, while a strong dollar makes silver more expensive for investors holding other currencies. This situation limits silver's recovery after a sharp correction.

From a geopolitical perspective

From a geopolitical perspective, the US and Iran have signed an interim agreement that includes the reopening of the Strait of Hormuz and the easing of sanctions on Iranian oil. This development has put downward pressure on oil prices as the market anticipates additional supply, helping to alleviate some inflation concerns on the energy side. However, the implementation of the Hormuz reopening remains a factor to monitor.

The market's next focus will be on the direction of the US dollar, Treasury yields, oil prices, and concrete evidence of normalizing energy flows through Hormuz. As long as the Fed maintains a hawkish tone, silver's gains could be restrained, although the decline in oil prices provides support from an inflationary perspective. (arl)