The dollar index edged slightly higher on Tuesday as concerns about the lack of progress in the diplomatic efforts between the US and Iran reinforced safe-haven demand.
Silver is down 17% in five days, and gold has fallen more than 10%. Precious metals have been particularly volatile amidst the ongoing U.S.-Iran war and broader market shifts. Gold fell to $4,691.70 per ounce on Thursday, while silver slipped to $70.68 per ounce.
The current decline in silver prices is not merely a temporary correction, but a deeper repricing of market expectations regarding the path of U.S. interest rates, which remains the most influential factor in the short term for non-yielding assets.
Bitcoin price rising about 8% since the first strikes against Iran, reaching a one-month high above $73,000. The move placed the digital asset ahead of several traditional safe-haven and risk assets during a period of geopolitical stress.
This is completely normal price action, and it does mean that people still think of the U.S. dollar as a safe haven. Investors are selling holdings in overseas stocks and assets in Europe and Asia, and they're cashing out into dollars. That dynamic increased demand for the greenback, pushing up its value against other currencies.
Part of the reason may lie in the fact that geopolitical risks had already been significantly priced in earlier. Prior to the correction, gold had risen for four consecutive weeks, pushing prices close to $5,420/oz and creating conditions for investment funds as well as retail traders to take profits, thereby triggering a sharp short-term pullback.
US crude oil is on track to rise by 9% when trading resumes, according to data from the broker IG, after Tehran said on Saturday it had effectively closed the strait of Hormuz, a key oil chokepoint, reportedly prompting the halt of some oil shipments.
Gold has been on a tear as the dollar is under pressure, raising questions about global confidence and market risk. The US economy and markets are unmatched in size. The dollar is the king of currencies, and US treasuries are often considered a safe-haven asset. But, investors appear to be reassessing that. This has weighed down on the greenback and cooled the stock markets.
"London's FTSE 100 has scaled fresh heights as its defensive qualities shine once again in an uncertain world. "Investors are grappling with the fallout from a tech sell-off and are assessing deteriorating relations between the US and Iran. The Footsie hit fresh record levels in early trade, as investors sought solace in its constituents with mining, utilities and energy stocks making gains.
The two precious metals, the most classic of the "safe-haven" assets, have the tangibility and inherent scarcity to act a hedge in moments of turmoil, particularly when investors worry that politics or policy could undermine the value of the dollar or U.S. government bonds. That is why the metals' relentless rally to record highs since late last year-Gold is up 84% year-over-year and silver up a whopping 245% - has drawn attention from analysts.
