Silver (XAG/USD) rose for a second day, trading near $76.00 per troy ounce during Asian hours on Monday. Demand increased as safe-haven buying picked up after US–Iran talks stalled.
US President Donald Trump cancelled a planned delegation to Pakistan, which is mediating talks with Iran. Trump told Jared Kushner and Steve Witkoff not to travel, saying Iran “offered a lot, but not enough”.
Geopolitical Tensions Drive Safe Haven Demand
Trump said, “If they want to talk, they can come to us, or they can call us.” Iranian President Masoud Pezeshkian said Iran would not enter “imposed negotiations under threats or blockade.”
Traffic through a strategic waterway remains largely restricted due to Iran’s controls and a US naval blockade. This has supported crude oil prices and raised concerns about supply disruption.
Higher energy prices can add to inflation pressure and keep central banks cautious, which may cap gains in non-interest-bearing silver. The US Federal Reserve is expected to hold rates steady at its April meeting, with gradual cuts anticipated under incoming Chair Kevin Warsh.
With silver near $76.00, we are seeing a classic conflict between geopolitical fear and monetary policy. The stalled US-Iran talks are providing strong safe-haven support for the metal. However, the resulting spike in energy prices is creating a significant headwind through fears of a hawkish Federal Reserve.
The immediate outlook suggests high volatility, making long-volatility strategies like straddles on silver options attractive. We saw a similar situation back in early 2022 when the conflict in Ukraine sent precious metals soaring over 10% in a matter of weeks. The CBOE Silver Volatility Index (VXSLV) is currently trading above 35, a level not seen since that period, indicating traders are pricing in significant price swings.
Positioning And Fed Risk Ahead
For those betting on further escalation, buying call options on the July futures contract offers leveraged upside with defined risk. A breakdown in talks or further restrictions in the strategic waterway could easily push silver towards the $80 mark. Open interest in out-of-the-money calls has surged nearly 40% in the last week, showing this is already becoming a popular trade.
Conversely, the upcoming Federal Reserve meeting is a major risk, and purchasing put options could be a prudent hedge against a sharp decline. We only need to look back to the 2022-2023 hiking cycle to see how a hawkish Fed can pressure non-yielding assets, even amid inflation. If incoming Chair Warsh signals a firm stance against energy-driven inflation, we could see a rapid unwinding of speculative long positions.
The key is to watch the rhetoric from both Washington and Tehran, as any sign of de-escalation could trigger a sharp sell-off. The latest Commitment of Traders report shows managed money holds its largest net-long position in silver in over two years. This makes the market vulnerable to a sudden reversal if the geopolitical risk premium evaporates before the Fed meeting.
