Silver Price Outlook: XAG/USD Climbs Toward $57.00 Despite Expectations of Fed Rate Hikes

• Silver remains under pressure as escalating US-Iran tensions drive oil prices higher, stoking inflation concerns and reinforcing expectations of further Fed tightening.
• Overnight US military strikes on Iran led Tehran to declare the ceasefire void, raising the risk of significant disruptions to global energy supply routes.
• Cleveland Fed President Beth Hammack reiterated on Friday that inflationary pressures continue to persist.

Silver prices (XAG/USD) extended their advance for a second straight session, trading near $56.80 per troy ounce during Monday’s Asian session. Despite the recent rebound, the precious metal may encounter headwinds as escalating tensions between the United States and Iran continue to push crude oil prices higher, reviving inflation concerns and strengthening expectations that the Federal Reserve could tighten monetary policy further.

The US has carried out a ninth consecutive night of strikes against Iranian-linked targets. In response, Tehran announced that the ceasefire arrangement between the two countries is effectively over, raising concerns about potential disruptions to key energy transit routes across the Middle East.

Regional tensions intensified further after Iran launched a new barrage of ballistic missiles and one-way attack drones targeting locations in Bahrain, Jordan, Kuwait, and Iraq, triggering air raid warnings across parts of the Gulf. At the same time, the US military confirmed the death of another service member, bringing the total to three casualties within two days.

The conflict has increasingly affected civilian infrastructure, with reports of damage to bridges, utility networks, and port facilities. Adding to concerns over energy security, Kuwait Petroleum Corp. stated that one of its oil installations was struck by an Iranian attack over the weekend.

Although investors largely expect the Federal Reserve to leave interest rates unchanged at its next policy meeting, market expectations for tighter monetary policy have increased. According to CME FedWatch data, traders are now pricing in a 61.4% chance of a rate hike in September, reflecting growing concerns that higher energy prices could reignite inflationary pressures.

Hammack highlights widespread inflation risks, supporting a hawkish Fed outlook

Cleveland Fed President Beth Hammack delivered a notably hawkish message, earning a 7.2/10 FXS SpeechTracker score, comfortably above the historical average of 6.6/10. Her remarks reflected growing concern that inflationary pressures remain entrenched across the economy. By stressing calls from businesses for stronger measures to contain rising prices and noting that many households continue to struggle financially despite solid economic growth and resilient consumer spending, Hammack underscored the disconnect between healthy economic activity and increasing cost-of-living challenges.

She also pointed to several sources of inflation pressure, including elevated energy costs, supply-chain constraints, rising insurance expenses, and growing demand linked to AI infrastructure and data-center investments. By identifying persistent inflation as the primary risk facing policymakers, Hammack’s comments reinforced expectations that the Federal Reserve may maintain a restrictive policy stance for longer, providing underlying support for the US Dollar.

Meanwhile, the FXS Fed Sentiment Index climbed 2.06 points to 128.64, signaling that overall Fed communication remains firmly tilted toward tightening and well above the neutral threshold of 100. Combined with Hammack’s above-average hawkish score, the increase suggests that policymakers continue to prioritize inflation control over concerns about economic growth, a backdrop that generally favors the Dollar against lower-yielding currencies.