On Wednesday, the price of silver continued its weakness from the previous session during Asian trading hours, falling to around $57.50 per ounce with an intraday loss exceeding 1%.
Despite silver's dual role as both an industrial metal and a safe-haven asset, the market is growing increasingly cautious about the sustainability of U.S.-Iran peace prospects in the current environment. Inflows of safe-haven funds have failed to provide sufficient support for the silver price.
Previously, a preliminary memorandum of understanding reached between the U.S. and Iran in Oman had driven down geopolitical risk premiums, leading to a sustained correction in silver from its mid-June highs above $62.
However, as negotiations entered a substantive phase, disagreements began to surface, and the decline in silver prices deepened progressively during this process.
U.S.-Iran Negotiation Stalemate: Undercurrents Beneath Surface Calm
On Tuesday, U.S. negotiators arrived in Doha to discuss Iran's demand to levy transit fees near the Strait of Hormuz. This strait carries approximately 20% of the world's energy supply, underscoring its strategic importance. However, the U.S. negotiating team made it clear they are only willing to meet with mediators and will not engage in direct talks with Iranian representatives.
This stance creates a significant gap with Tehran's expectations. Iran had previously stated its plan to begin collecting the strait transit fees after the 60-day negotiation window expires, viewing this mechanism as confirmation of its substantive control. The U.S. refusal to engage in direct dialogue has heightened market concerns about whether global shipping can continue to use the waterway without paying any fees.
For silver, the impact of this stalemate is multifaceted. On one hand, uncertainty in the Middle East should theoretically support safe-haven assets. On the other hand, sustained tensions could push oil prices higher again, thereby reinforcing market expectations that the Federal Reserve will maintain high interest rates—a dynamic that weighs on non-yielding assets like silver.
Federal Reserve Expectations: Interest Rate Outlook Weighs on Silver
If the U.S.-Iran negotiation deadlock leads to renewed increases in oil prices, inflation expectations would subsequently rise. This would force the market to reassess the Federal Reserve's monetary policy path, potentially increasing the probability of an interest rate hike in the remaining policy meetings this year.
As a non-yielding asset, silver is highly sensitive to changes in real interest rates. When the market prices in a higher probability of a Fed rate hike, the opportunity cost of holding silver increases, prompting capital to flow from precious metals to yield-bearing assets. The recent relative strength of the U.S. dollar index also reflects, to some extent, the unfolding of this logic.
Key Data Preview: ADP and ISM Manufacturing PMI to Offer Short-Term Guidance
During the North American trading session on Wednesday, the market will receive two key data releases:
The U.S. ADP Employment Change report for June: The private sector is expected to have added 113,000 jobs, slightly lower than the 122,000 added in May. A figure below expectations could spark concerns about a loosening labor market, potentially weighing on the dollar and supporting silver. Conversely, a stronger-than-expected number could reinforce expectations for Fed tightening, putting further pressure on silver.
The U.S. ISM Manufacturing PMI for June: The market expects the index to remain unchanged at 54.0. A reading above expectations would indicate robust expansion in U.S. manufacturing, potentially strengthening the "soft landing" narrative and weakening safe-haven demand. A reading below expectations could reignite concerns about an economic slowdown, providing safe-haven support for silver.
Additionally, the market is preparing for the release of the U.S. Non-Farm Payrolls report for June on Thursday. This data will provide a more comprehensive picture of the labor market and serve as a crucial basis for judging the Federal Reserve's next policy moves.
Outlook for Silver Prices
In the short term, the direction of silver prices will depend on the interplay of three key variables:
First, the progress or stalemate in U.S.-Iran negotiations. If both sides remain unable to reach consensus on the transit fee issue, geopolitical uncertainty will stay elevated. However, the risk of renewed oil price increases would simultaneously pressure silver through the real interest rate channel.
Second, the performance of U.S. economic data. The ADP and ISM Manufacturing PMI will provide early signals for June's employment and manufacturing activity, directly influencing the market's pricing of the Fed's rate hike path.
Third, the direction of the U.S. dollar index. Silver typically exhibits a negative correlation with the dollar. If the dollar strengthens further, driven by safe-haven demand, silver will face additional downward pressure.
On the daily chart, spot silver entered a medium-to-long-term downtrend after reaching a historical high of 121.49. The current bearish trend is clear. The price has broken below the MA20, MA50, MA100, and MA200 moving averages, with moving averages across all timeframes exerting downward pressure. The MA20 (64.352) and MA50 (71.805) form a strong resistance zone, and the long-term MA200 (69.587) has also turned downward, resulting in a complete bearish moving average alignment.
In terms of indicators, the MACD continues to operate below the zero line, with the DIFF line (-4.222) below the DEA line (-3.701) and the green histogram persisting, indicating that bearish momentum has not dissipated. The RSI reading is at 30.48, approaching the oversold threshold of 30, suggesting a short-term need for a technical rebound. However, no clear bottom reversal signal has yet emerged.
As of the latest update, spot silver is trading at $57.55 per ounce.