Silver prices rose more than 3.5% in European trading on Monday, beginning a recovery from a one-week low and heading toward their first gain in four sessions, supported by lower global oil prices following progress in negotiations between the United States and Iran in Switzerland.

With markets assigning strong odds to a US interest rate hike this year, particularly after the Federal Reserve's latest hawkish meeting under Kevin Warsh, investors are awaiting additional decisive clues this week regarding the path of US monetary policy.

The Price

• Silver prices today: Silver rose 3.6% to $67.16, from an opening level of $64.85, after touching an intraday low of $64.25.

• At Friday's settlement, silver prices lost 1.35%, marking a third consecutive daily decline and hitting a one-week low of $63.28 per ounce.

• The white metal fell 4.65% last week, posting its fifth weekly loss in the past six weeks, pressured by the stronger US dollar and rising US Treasury yields.

Global oil prices

Global oil prices fell around 2% on Monday and are on track to reach their lowest levels in several months, supported by the passage of additional oil tankers through the Strait of Hormuz and progress in peace negotiations between the United States and Iran.

Lower oil prices help ease concerns about accelerating inflation, which could give the Federal Reserve greater room to keep interest rates unchanged in the near term, while supporting expectations for eventual rate cuts over the longer term.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap to reach a final agreement within 60 days, representing the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

US interest rates

• According to CME Group's FedWatch Tool, market pricing for the Federal Reserve to leave interest rates unchanged at its July meeting currently stands at 64%, while the probability of a 25-basis-point rate hike is 36%.

• Market pricing for the Federal Reserve to keep rates unchanged at its December meeting currently stands at 11%, while the probability of a 25-basis-point rate increase is 89%.

• To reassess those expectations, investors are closely monitoring upcoming US economic data in addition to comments from Federal Reserve officials.

The US dollar remained strong on Monday as investors grew more optimistic about the prospects of a deal following the first round of talks between the United States and Iran. Meanwhile, the Japanese yen hovered near its weakest level in almost 40 years, while the British pound slipped after UK Prime Minister Keir Starmer announced his intention to resign.

The two mediating countries, Qatar and Pakistan, said that the United States and Iran had agreed on a roadmap toward a final agreement to end the conflict within 60 days. However, investors remained concerned about US President Donald Trump's threats to resume military action in the Middle East and Tehran's announcement that it would close the strategically important Strait of Hormuz.

Oil prices fell around 2%, with Brent crude settling near $79.1 per barrel.

Chris Weston, Head of Research at Pepperstone, said: "The physical market is still experiencing supply tightness, which should provide some support, but moves in foreign exchange and commodities will remain closely tied to developments in the energy sector."

The British pound fell 0.1% to $1.322, remaining near session lows after Labour Party leader Starmer said he would step down, opening the door for rival Andy Burnham to become Britain's seventh prime minister in ten years since the Brexit referendum.

Lee Hardman, Senior Currency Analyst at MUFG, said: "At the moment, Andy Burnham appears to be the frontrunner. He has attempted to reassure the UK government bond market that he will adhere to fiscal rules, and there are reports that he is working with highly respected economists."

He added: "That has already provided some reassurance to investors and should help limit downside risks for both sterling and UK government bonds in the near term."

Yen nears a 40-year low

At the same time, the Japanese yen remained under pressure, trading near ¥161.73 per dollar, close to the two-year low reached last week. A move beyond ¥161.96 would push the currency to its weakest level since 1986.

Japanese Finance Minister Satsuki Katayama said on Monday that authorities stand ready to respond appropriately to currency movements at any time.

Matt Simpson, Senior Market Analyst at StoneX, said: "Japan's Ministry of Finance may be tired of watching the dollar-yen rate climb toward 2024 highs, but it may also feel powerless to do much about it, as intervening against a hawkish Federal Reserve and a strong US economy could prove costly and ineffective."

The yen has already surrendered the gains it made following a round of government intervention on April 30, when Tokyo spent a record ¥11.7 trillion ($72.44 billion). The Federal Reserve's hawkish shift subsequently encouraged traders to increase their bets on higher US interest rates this year.

Jeremy Stretch, Head of FX Strategy at CIBC, said that even if the Bank of Japan raises rates at a faster pace, the fact that traders now expect the Federal Reserve to raise US interest rates at least once this year means the dollar is likely to remain strong.

He added: "Interest rate differentials remain particularly unfavorable, and if we continue to live in a world where US exceptionalism remains the dominant theme, then, aside from intervention risks, the path of least resistance is for the dollar to move higher against the yen."

Strong bets on a stronger dollar

Investors increased their bullish dollar positions over the past week. Data from the US Commodity Futures Trading Commission showed that speculators now hold their largest net bullish position on the dollar in 16 months, valued at nearly $30 billion.

The US Dollar Index, which measures the currency against six major peers, stood near 101 points, close to its highest level in a year.

The index has gained around 3% since the beginning of the year, supported in part by expectations that US interest rates will remain elevated for longer.

Gold prices rose more than 1.5% in European trading on Monday, recovering from a one-week low and heading for their first gain in four sessions, supported by lower global oil prices following progress in negotiations between the United States and Iran in Switzerland.

With markets heavily pricing in the possibility of a US interest rate hike this year, particularly after the Federal Reserve's latest hawkish meeting under Kevin Warsh, investors are awaiting further decisive clues this week regarding the path of US monetary policy.

The Price

• Gold prices today: Gold rose more than 1.5% to $4,220.71, from an opening level of $4,155.54, after touching an intraday low of $4,136.65.

• At Friday's settlement, gold lost 1.3%, marking a third consecutive daily decline and hitting a one-week low of $4,122.06 per ounce.

• The precious metal declined 1.5% last week, posting a third consecutive weekly loss due to rising US dollar levels and Treasury yields following the Federal Reserve meeting.

Global oil prices

Global oil prices fell around 2% on Monday and are on track to reach their lowest levels in several months, helped by the passage of additional oil tankers through the Strait of Hormuz and progress in peace negotiations between the United States and Iran.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap to reach a final agreement within 60 days, representing the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

US interest rates

• The Federal Reserve left interest rates unchanged last week for a fourth consecutive meeting.

• The Federal Open Market Committee voted unanimously (12-0) to keep the benchmark federal funds rate within a range of 3.50% to 3.75%, the lowest level since September 2022.

• New Federal Reserve Chairman Kevin Warsh introduced a major revision to the monetary policy statement by removing language that had previously suggested a bias toward future interest rate cuts, signaling a more restrictive and cautious stance.

• Policymakers unanimously removed all previous projections that had indicated interest rate cuts this year, while 9 of the 18 committee members now expect at least one rate increase before the end of 2026.

• Following the meeting, according to CME Group's FedWatch Tool, market pricing for the Federal Reserve to leave rates unchanged at its July meeting fell from 91% to 72%, while the probability of a 25-basis-point rate hike increased from 9% to 28%.

• Market pricing for the Federal Reserve to keep rates unchanged at its December meeting dropped from 45% to 15%, while expectations for a 25-basis-point rate increase rose from 55% to 85%.

• To reassess those expectations, investors are closely monitoring upcoming US economic data in addition to comments from Federal Reserve officials.

Gold outlook

Edward Meir, an analyst at Marex, said: "The situation in Switzerland is very different from what it was just hours ago when both sides were arguing, but it now appears that they are making some progress."

Meir added: "We will continue to trade on geopolitical signals for a while longer, but the situation remains volatile, so it may be best to watch developments from the sidelines for now."

SPDR Fund

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged on Friday, leaving total holdings at 1,020.49 metric tons, the highest level since June 4.

The euro fell in European trading on Monday against a basket of global currencies, resuming losses that paused on Friday against the US dollar. The single currency is moving back toward its lowest level in three months as investors continue to favor the US dollar as the most attractive available investment, particularly after the Federal Reserve's hawkish policy meeting, which significantly strengthened expectations for a US interest rate hike in December.

After the European Central Bank reiterated at its latest meeting that it is not committed to a predetermined path for monetary policy or interest rates, investors are awaiting further key economic data from the euro area to reassess expectations for European interest rates.

The Price

• Euro exchange rate today: The euro fell 0.1% against the dollar to $1.1453, from an opening level of $1.1465. The session high was recorded at $1.1474.

• The euro ended Friday up 0.1% against the dollar, its first gain in three sessions, after earlier touching a three-month low of $1.1418.

• The euro lost 0.9% against the dollar last week, marking its second weekly decline in the past three weeks, following the Federal Reserve's hawkish meeting under new Chairman Kevin Warsh.

US dollar

The US Dollar Index rose 0.15% on Monday, resuming gains that paused on Friday and moving back toward a 13-month high, reflecting continued strength in the US currency against a basket of major and minor currencies.

The advance is being driven by demand for the dollar as the most attractive available investment, especially after the Federal Reserve's latest meeting, which was more hawkish than markets had anticipated and significantly boosted expectations for at least one US interest rate increase this year.

This has outweighed the negative impact of fading safe-haven demand following the conclusion of the first round of US-Iran negotiations in Switzerland, which resulted in a 60-day roadmap aimed at reaching a final agreement between the two sides.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap to reach a final agreement within 60 days, marking the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

European interest rates

• Reports: The European Central Bank is considering pausing monetary policy normalization in July if energy prices remain at current levels.

• Money market pricing for a 25-basis-point ECB rate hike in July currently remains stable at around 30%.

• Investors are awaiting additional economic data from the euro area, particularly inflation, unemployment, and wage figures, to reassess the above expectations.