Silver price remains under pressure as Fed decision, US-Iran truce shape outlook

Silver (XAG/USD) trades around $69.85 on Wednesday at the time of writing, down 0.25% on the day. Traders remain cautious ahead of the Federal Reserve’s (Fed) policy decision later in the day, which could provide fresh guidance on the outlook for US interest rates.

The white metal continues to benefit from a relatively supportive macroeconomic environment. The announcement of a framework peace agreement between the United States (US) and Iran has helped reduce the risk of disruptions to global energy supplies. This development has fueled expectations of easing energy-driven inflation pressures, a factor that has supported demand for precious metals in recent days.

Under the preliminary terms of the agreement, the two countries have agreed to a 60-day ceasefire and the reopening of the Strait of Hormuz, a strategic route for global Oil trade. Further discussions are expected regarding Iran’s nuclear program, while several aspects of the agreement remain subject to differing interpretations between Washington and Tehran.

Market attention is now turning to the Fed. The US central bank is widely expected to leave its benchmark interest rate unchanged within the 3.5%-3.75% range, but investors will focus primarily on whether policymakers revise their interest rate and inflation projections. The updated economic forecasts and the so-called dot plot will be closely scrutinized.

Investors will also analyze comments from Fed Chair Kevin Warsh to assess whether the central bank maintains a hawkish stance amid still-persistent inflation. Markets continue to price in the possibility of a 25-basis-point rate hike before year-end, limiting the upside potential for non-yielding assets such as Silver.

The recent performance of the US Dollar (USD) also remains an important factor for the precious metal. Optimism surrounding the US-Iran agreement has weighed on the Greenback in recent days, providing indirect support to Dollar-denominated metals. However, investors prefer to wait for the outcome of the Fed meeting before taking more aggressive directional positions on Silver.