Silver surged more than 5% on Friday to trade near $82.60 per ounce, lifted by a weaker US dollar and growing expectations that the Federal Reserve could cut interest rates later this year.
The move came as easing geopolitical tensions in the Middle East initially triggered a broad repricing across commodity markets, though later reports suggested that shipping conditions in the region remain fragile.
Oil swings as strait of hormuz reopening signals ease, then caution
Iranian foreign minister Abbas Araghchi said the strait of Hormuz had reopened for commercial traffic during the current ceasefire, easing one of the world’s key maritime chokepoints and reducing perceived supply risks. The announcement initially drove West Texas Intermediate (WTI) crude down toward $80 per barrel, one of its sharpest recent daily declines, as traders unwound part of the risk premium built into energy prices.
Lower oil prices reduced immediate inflation worries, reinforcing the view that the Fed may have more room to ease policy later this year. However, subsequent reports on Friday indicated that traffic through the strait remains limited and subject to a naval blockade, with some vessels reportedly turned back. That renewed caution saw WTI futures slip toward $91 per barrel, a decline of 4.82% on hopes for a lasting ceasefire, but not as deep as the initial drop.
Fed expectations shift as inflation pressure cools
Fed rate expectations moved in tandem with the oil and inflation narrative. Data from the CME FedWatch tool showed that markets are now pricing in a 38.2% probability of a 25-basis-point rate cut by year-end, up from 25.9% the previous day.
While longer-term odds of easing have risen, short-term expectations remain anchored. Pricing linked to the coming Federal Reserve meetings implies a 98% probability that rates will be left unchanged through the June meeting, underscoring that any policy shift is still seen as a later-2024 story.
Lower interest rate expectations tend to support non-yielding assets such as precious metals, as the opportunity cost of holding them instead of interest-bearing cash or bonds declines.
Dollar hits multi-week low, boosting metals
The US dollar index, which tracks the greenback against six major currencies, hovered in the 97.80–97.85 range, its lowest level in weeks. The softer dollar made dollar-priced commodities cheaper for buyers using other currencies, providing another tailwind for silver and other metals.
A weaker US currency often translates into firmer demand for both industrial and precious metals, reinforcing moves driven by changes in interest rate expectations.
Middle east diplomacy lifts sentiment but risks remain
Recent diplomatic progress in the Middle East has broadly improved risk sentiment, with markets watching for potential US–Iran discussions over the weekend. Still, the partial and fragile nature of the reopening of the strait of Hormuz shows that supply risks have not fully abated.
For metals, the main drivers remain expectations around Federal Reserve policy and currency trends rather than geopolitics alone. Traders are now focused on upcoming Fed communications ahead of the next policy meeting blackout period, looking for any signal on the timing and pace of potential rate cuts that could further influence silver and broader commodity markets.
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