Silver (XAG/USD) trades on the back foot on Tuesday, pressured by a firmer US Dollar (USD) and hawkish Federal Reserve (Fed) expectations amid ongoing tensions in the Middle East.
At the time of writing, XAG/USD is trading around $76.43, down nearly 2.0% on the day
Market sentiment turned cautious after fresh US military strikes in southern Iran on Monday reduced hopes that the conflict in the Middle East would end anytime soon. Although diplomatic talks between Washington and Tehran remain ongoing, lingering uncertainty surrounding the negotiations continues to keep the US Dollar well supported. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.15 after briefly slipping below the 99.00 mark on Monday.
Meanwhile, elevated Oil prices continue to fuel inflation concerns globally, reinforcing expectations that the Federal Reserve (Fed) may keep interest rates higher for longer. According to the CME FedWatch Tool, traders are currently pricing in nearly a 40% chance of a 25 basis point (bps) rate hike at the December meeting. Higher interest rate expectations tend to weigh on non-yielding assets such as Silver, while the technical outlook also points to a consolidative bearish bias.