Silver (XAG/USD) traded near $76.55 on Monday, up 0.80% on the day, after stabilising following last week’s sell-off. It rose as the US Dollar weakened amid renewed hopes of diplomatic progress between the US and Iran.
Iran’s Foreign Ministry said talks with Washington are ongoing. Officials said both sides are reviewing a recent peace proposal, while Iran and Oman are holding technical talks on restoring safe transit through the Strait of Hormuz.
Dollar Weakness Supports Silver
Lower Middle East tension reduced demand for the safe-haven Dollar. The US Dollar Index (DXY) eased towards 99.10 after earlier intraday highs, offering some support to Silver.
Silver’s rebound remained capped by high bond yields and inflation concerns tied to energy prices. The US 10-year Treasury yield stayed near 4.6%, close to one-year highs, as markets reassessed Federal Reserve policy.
Crude Oil’s recent rise added to concerns that inflation may stay elevated, limiting expectations for rapid Fed rate cuts. CME FedWatch data showed traders increasingly factoring in restrictive policy lasting through this year.
Silver also faced supply and demand pressures. India moved to curb a large share of Silver imports, and UBS cut forecasts for global Silver investment demand due to softer industrial demand and rising mining supply.
Market Conditions Shift From 2025
Looking back at the brief recovery we saw in late 2025, the optimism was clearly misplaced as macroeconomic pressures ultimately won out. The spike to $76.55, driven by temporary US-Iran diplomacy hopes, has since collapsed, with silver now trading around $41.20. For derivative traders, this highlights the danger of chasing geopolitical headlines over fundamental drivers like interest rates.
The US Dollar, which had softened to the 99.10 level during that period, is now a major headwind, with the DXY currently strong at 105.50. While the 10-year Treasury yield is slightly off its highs, holding at 4.45%, it remains elevated enough to cap significant rallies in non-yielding silver. This environment suggests buying out-of-the-money put options to hedge long positions or using bear call spreads to profit from a range-bound or downward-drifting market.
Federal Reserve policy remains the dominant factor, just as it was back then. While markets in 2025 were worried about a lack of aggressive cuts, we now see a slow but steady path; the CME FedWatch tool indicates a 65% probability of a single 25-basis-point cut by September. This has lowered implied volatility, making options cheaper and potentially favoring strategies that bet on a slow grind rather than a dramatic price collapse.
A key difference from late 2025 is the improved outlook for industrial demand, which counters some of the macroeconomic drag. Recent International Energy Agency reports project a 15% year-over-year increase in silver demand for photovoltaic cells through 2027, a stark contrast to the softer forecasts we saw from analysts at the time. This fundamental support could make selling naked calls a risky strategy, as any positive economic data might trigger sharp, industry-led rallies.
We also note that the import curbs from India, which added pressure last year, have been partially relaxed. India’s Commerce Ministry data from April 2026 showed a 20% rebound in silver imports compared to the previous quarter, removing a key source of downside risk. This suggests that while the macro environment favors cautious or bearish positions, a solid floor of physical demand is being rebuilt.
