XAG/USD falls to near $70.50 due to Fed rate hike odds

• Silver declines as traders price in a more hawkish Federal Reserve policy outlook.
• Fed Chairman Kevin Warsh stressed that price stability remains the central bank’s ultimate guiding principle.
• The US and Iran signed an initial agreement, starting 60 days of negotiations for a final peace deal.

Silver price (XAG/USD) extends its losses for the third successive day, trading around $64.40 per troy ounce during the Asian hours on Friday. Silver prices fall as the traders price in the hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook. Higher borrowing costs increase the opportunity cost of holding non-yielding assets like Silver, reducing their appeal.

In his debut press conference, newly appointed Federal Reserve (Fed) Chairman Kevin Warsh emphasized that “price stability” remains the Fed’s ultimate guiding principle. The Federal Open Market Committee (FOMC) voted unanimously on Wednesday to hold its benchmark overnight borrowing rate steady at a range of 3.5%–3.75%. However, the decision carried a hawkish tone, with nearly half of the officials signaling that at least one rate hike could be required later this year.

The hawkish Fed signals outweigh the positive impact of the US-Iran peace agreement, which pushed oil prices lower and eased inflation concerns. The US and Iran signed an initial agreement, kicking off 60 days of negotiations on a final deal to end the war, per CNN.

Additionally, the US military earlier confirmed it had ended its blockade on Iranian ports near the Strait of Hormuz, as officials claim millions of barrels are once again flowing through the vital waterway. Positive developments surrounding the US-Iran peace deal could boost riskier assets, such as the shared currency, in the near term. However, traders remained cautious, expecting it to take months for shipping and energy flows to recover to pre-conflict levels.