Silver (XAG/USD) fell on Wednesday and traded near $85.30, down 2.12% on the day. It gave back recent gains as the US Dollar rose and US Treasury yields moved higher, reducing demand for non-yielding assets.
US inflation data supported the Dollar. CPI rose 0.3% month-on-month in February, up from 0.2% in January, and was in line with expectations; the annual rate held at 2.4%.
Core CPI increased 0.2% month-on-month and stayed at 2.5% year-on-year. Inflation remains above the Federal Reserve’s 2% target, which helps keep policy expectations cautious and supports yields.
The Dollar also gained from demand for liquidity amid geopolitical uncertainty. Concerns continued over possible disruption in the Strait of Hormuz, and Iranian officials said oil could rise towards $200 per barrel if conflict worsens, alongside reports of multiple shipping incidents.
The International Energy Agency said it would release about 400 million barrels from strategic reserves. Ongoing high energy prices have raised inflation concerns, while the stronger Dollar and higher yields limited Silver’s upside.
We remember this time last year when silver was stuck around $85.30, pressured by a strong dollar and stubborn inflation figures that were holding at 2.4%. Now, with the latest February 2026 CPI data showing inflation has cooled to 2.1%, the entire landscape for precious metals has shifted. This moderation in price pressures is fueling speculation that the Federal Reserve’s cycle of restrictive policy is nearing its end.
For derivative traders, this environment suggests looking at call options on silver, particularly with strikes above the current $92 level. The implied volatility in the options market still presents an opportunity to position for a potential breakout if the Fed signals a definitive pivot in its upcoming meetings. We saw a similar setup in late 2018 before the Fed’s pivot in 2019, which led to a significant rally in precious metals over the following year.
The geopolitical fears from 2025 surrounding the Strait of Hormuz did not lead to $200 oil, but Brent crude has remained elevated, recently trading near $95 per barrel. This persistent energy cost remains the primary risk to the disinflationary trend, potentially forcing the Fed to delay any planned rate cuts. Therefore, traders might consider hedging long silver positions with puts on energy-sensitive equities or using futures to play the range in oil.
Looking back, the high US Treasury yields were a major headwind for silver throughout much of 2025, a direct result of the Fed’s cautious stance. Today, the 10-year yield has softened considerably from its peak, reflecting the market’s pricing of at least two rate cuts by the end of this year. This shift makes non-yielding silver a more attractive asset, creating a fundamental tailwind that was absent twelve months ago.
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