Despite escalating tensions between the United States and Iran, gold and silver remain more heavily influenced by inflation, U.S. Treasury yields, and expectations surrounding Federal Reserve policy.

Gold and Silver Remain Range-Bound

According to analysis from StoneX, the precious metals market currently lacks sufficient momentum to establish a sustainable upward trend.

Buying activity in some Asian markets is being offset by selling elsewhere in the region. As a result, gold and silver continue to trade within relatively narrow ranges, with downside risks viewed as slightly greater than the potential for a prolonged rally.

Energy Prices Keep Inflationary Pressure Elevated

Energy remains one of the most important variables affecting U.S. inflation.

Although WTI crude has fallen approximately 26% from its April peak, oil prices remain 24% higher than a year earlier. Beyond their direct impact, elevated energy prices also increase transportation, manufacturing, and logistics costs.

If tensions in the Middle East continue, oil prices could remain within a higher range for an extended period, making it more difficult for inflationary pressure to ease quickly.

The Fed Faces a Difficult Policy Decision

Members of the Federal Open Market Committee remain divided over the next direction of monetary policy.

One group believes the Fed may need to raise interest rates further if inflation remains elevated. Others favor keeping policy unchanged to avoid excessive tightening and potential damage to the economy.

This lack of consensus means markets will continue to closely monitor inflation data, energy prices, and signals from Federal Reserve officials.

Treasury Yields Remain a Major Headwind

The yield on the 10-year U.S. Treasury has climbed from below 4% in late February to around 4.6%.

Higher yields increase the opportunity cost of holding gold and silver, as neither metal generates interest income. This has become a clear headwind for both assets, particularly silver, which is also influenced by industrial demand.

Speculative Capital Remains Cautious

Positioning data suggest that investors have yet to return to the precious metals market in significant numbers.

Gold long positions are approximately 23% below their 12-month average, while silver long positions are as much as 41% lower. Silver ETFs have also recorded a sharp decline in holdings since the beginning of the year, despite some bargain buying after recent price declines.

Conclusion

Geopolitical risks may trigger short-term rallies in gold and silver. However, the longer-term direction of both metals will continue to depend primarily on inflation, U.S. Treasury yields, and the Federal Reserve’s next policy decision.

Under current conditions, the market is likely to remain range-bound until clearer signals emerge from inflation and interest-rate expectations.

Source: Kitco