XAG/USD slips below $74.50 on war driven inflation

• Silver declines as the US–Iran conflict fuels inflation, boosting expectations of prolonged or tighter central banks’ policy.
• Tehran signaled that it could end hostilities under conditions, but Trump rejected the proposal.
• The BoJ is expected to hold rates at 0.75% Tuesday amid economic concerns from the US–Iran war.

Silver price (XAG/USD) falls around 1.5%, trading around $74.40 per troy ounce during the Asian hours on Tuesday. The non-yielding metal declines as the US–Iran conflict fuels an energy-driven inflation shock, raising expectations of prolonged or tighter central banks’ policy.

However, markets weigh prospects of a lasting ceasefire and a potential reopening after Iran’s fresh proposal to the United States (US). Tehran reportedly signaled via Pakistan that hostilities could end if Washington lifts its naval blockade, revises transit rules through Hormuz, and guarantees against future military action.

On the contrary, a US official said on Monday that President Donald Trump is dissatisfied with Iran’s proposal. Iranian sources added that Tehran avoided addressing its nuclear program until hostilities cease and Gulf shipping disputes are resolved.

Traders are also looking ahead to policy decisions from key central banks this week, including the US Federal Reserve (Fed), European Central Bank (ECB), and Bank of Japan (BoJ). The Federal Reserve (Fed) is widely expected to keep interest rates unchanged at its upcoming April policy meeting on Wednesday, maintaining the federal funds target range at 3.50% to 3.75%. This would mark the third consecutive hold.

The Bank of Japan is expected to hold rates at 0.75% later in the day amid economic concerns from the US–Iran war, while the European Central Bank is also likely to keep its deposit rate unchanged at 2.0% on Thursday.