XAG/USD rises to near $60.00 despite surging inflation fears

• Silver surges despite rate-hike headwinds as escalating geopolitical tensions potentially drive institutional capital into safe-haven assets.
• The white metal’s upside may be limited as Middle East tensions and rising oil prices fuel inflation and rate-hike fears.
• Fed Chair Warsh and other officials repeatedly stressed that inflation remains a central bank concern, signaling continued policy caution.

Silver price (XAG/USD) gains ground for the fourth successive day, trading around $59.70 per troy ounce during the Asian hours on Wednesday. Silver prices are surging despite rising rate-hike expectations, as powerful market forces outweigh the drag of higher interest rates. Amid escalating geopolitical tensions, institutional investors are possibly fleeing equities and channeling capital into tangible safe-haven assets like Silver.

However, the potential upside for the non-yielding metal may be limited, as escalating Middle East tensions and rising oil prices fuel inflation fears and keep interest rate expectations elevated. US President Donald Trump downplayed the likelihood of immediate negotiations with Tehran following mutual military strikes and threats from Iran-backed Houthi militants to disrupt Red Sea shipping routes. On Tuesday, Trump pledged to respond if the group interfered with the waterway, though he did not outline specific action.

In response, Iran’s top military command stated via the Xinhua news agency that Tehran will expand its strikes to target US and allied assets across the region if the US attacks Iranian nuclear facilities.

On the monetary policy front, Fed Chair Warsh has repeatedly stressed that inflation remains a key concern for the central bank. This cautious stance has been echoed by several other Fed officials in recent weeks as they navigate ongoing economic pressures.

Policymakers have now entered their customary blackout period ahead of next week’s FOMC meeting, where the central bank is widely expected to leave the federal funds rate unchanged. Despite this anticipated pause, expectations for tighter policy remain elevated beyond July. In fact, the CME FedWatch Tool indicates that markets are currently pricing in over 71% odds of at least a 25 basis-point rate hike at the upcoming September meeting.