Silver prices declined to Rs 2.43 lakh per kg on MCX on Tuesday, as increasing US Treasury yields and heightened expectations of Federal Reserve rate hikes overshadowed the easing geopolitical tensions in the Middle East. Investors exhibited a degree of caution in anticipation of critical US inflation data, while robust economic indicators that surpassed expectations bolstered speculation that the Federal Reserve may maintain elevated interest rates for an extended period. This scenario poses challenges for non-yielding assets like silver. MCX Silver price declined by 1% to Rs 2,43,932 per kg, whereas the MCX Gold rate exhibited minimal movement, decreasing by 0.25% to Rs 1,54,396 per 10 grams. Spot silver declined by 0.7% to $67.71 per ounce, whereas spot gold remained relatively stable at $4,332.50 per ounce as of 0222. In the previous trading session, gold declined to its lowest level in over two months as investors reevaluated the demand for safe-haven assets in light of diminishing geopolitical tensions.

The latest market movements occurred after Iran and Israel suggested a halt to direct hostilities in response to an appeal from US President Donald Trump. Tehran has issued a warning regarding the potential resumption of military action should Israel persist in its strikes against Hezbollah in Lebanon, highlighting the tenuous stability of the ceasefire. While hopes of reduced hostilities have alleviated some pressure on commodity markets, the ongoing conflict’s ramifications for global energy supplies remain a significant concern. Now in its fourth month, the war has disrupted shipments through the Strait of Hormuz, resulting in higher oil prices and intensifying concerns about ongoing inflation. Increased energy expenses have bolstered anticipations that central banks, notably the US Federal Reserve, might maintain higher interest rates for an extended period or potentially increase them further. Such an environment is generally detrimental to non-yielding assets such as silver and gold.

Bond markets continued to face pressure following a stronger-than-anticipated US payrolls report for May, which bolstered expectations for a more stringent monetary policy. Investors are increasingly factoring in the likelihood of further rate hikes by the Federal Reserve in the upcoming months. Market pricing currently suggests a probability of approximately 60% for a Federal Reserve rate increase as early as October, with a quarter-percentage-point hike nearly fully accounted for in December. Traders are currently assigning over a 70% probability to the likelihood of a rate hike occurring by the end of the year, as indicated by the CME FedWatch Tool. Reflecting these expectations, the yield on the two-year US Treasury note stood at 4.170%, after reaching 4.201% overnight, its highest level since early 2025. Meanwhile, oil prices experienced a modest decline following recent increases.

Brent crude experienced a decline of 0.7%, settling at $93.57 a barrel after reaching a peak of $98 overnight. Meanwhile, US West Texas Intermediate crude also fell by 0.7%, now priced at $90.62 a barrel. Goldman Sachs has expressed a cautious outlook, anticipating that the Federal Reserve will maintain interest rates at their current levels until 2026 and defer any potential rate cuts until 2027. This projection is based on observations of resilient economic growth and ongoing strength in the labour market. Investors are currently anticipating the release of the US Consumer Price Index data for May on Wednesday. The report is anticipated to indicate that elevated energy prices have persistently propelled headline inflation upward, offering additional insights into the Federal Reserve’s forthcoming policy decisions and possibly influencing the short-term trajectory for silver and other precious metals.