Geopolitical Developments Ease Safe-Haven Demand

Reports of potential US-Iran peace talks and a 10-day ceasefire between Israel and Lebanon have eased geopolitical tensions in the Middle East, reducing investor demand for safe-haven assets. This has caused both gold and silver to trade within a confined range, with gains capped by the prospect of de-escalation. While the situation has put some downward pressure on oil prices, concerns over potential disruptions in the Strait of Hormuz continue to provide a floor for energy markets .

Central Banks Remain Cautious Amid Inflation Risks

Major central banks are maintaining a cautious policy stance in light of geopolitical uncertainty and its potential impact on inflation. Federal Reserve officials noted that conflict-related shocks could affect not only prices but also the availability of commodities, with one projecting inflation to rise toward 3% this year on higher energy costs. Similarly, ECB accounts revealed concerns over inflation spillovers from Middle East risks, leading the bank to favor a measured approach to future rate decisions .

US Dollar Rebounds on Strong Data, Weighing on Metals

The U.S. dollar has staged a recovery after recent losses, creating headwinds for precious metals prices. The dollar's strength is supported by better-than-expected economic data, including a notable decline in weekly jobless claims, which points to continued labor market resilience. This economic outperformance, combined with policy divergence between the Federal Reserve and other central banks, has reinforced the dollar's appeal and pressured dollar-denominated assets like gold and silver .