Silver surges past $70! Middle East tensions escalate, triggering a wave of investor risk aversion

Early Monday after the Asian market opened, silver/USD (XAG/USD) surged over 2.5%, approaching the $69.00 level and hitting a new record high. The rally is driven by renewed geopolitical tensions in the Middle East.

Middle East Conflict Escalates, Safe-Haven Assets Become Favorites

The confrontation between Israel and Iran reignited. Reports indicate that Israeli officials are increasingly wary of Iran expanding its ballistic missile production and rebuilding nuclear facilities that were targeted earlier this year. There are signs that Israel is evaluating the feasibility of launching another attack and preparing to brief the U.S. government on related plans.

Against this backdrop, investors are flocking to traditional safe-haven assets. Silver, as an important safe-haven tool, benefits from geopolitical risk premiums similar to gold, making it a favored investment. Concerns over supply and risk aversion on the demand side are jointly pushing silver prices higher.

Dimming Outlook for Federal Reserve Policy, Dovish Expectations Frustrated

On the monetary policy front, the likelihood of the Federal Reserve cutting interest rates at the January meeting has dropped to near zero. Although November inflation data was weak, market expectations for a dovish shift have not gained momentum.

According to the latest inflation indicators, the U.S. Consumer Price Index (CPI) for November fell to an annual rate of 2.7%, down from 3.0% in October, showing some improvement but still exceeding economists’ previous forecast of 3.1%. The core CPI, which excludes food and energy volatility, decreased from 3.0% to 2.6%, indicating persistent price pressures.

In this context, the probability of the Fed initiating a rate cut cycle in the near term is minimal. This suggests that the high-interest-rate environment may persist longer, continuing to pressure the real economy and risk assets, thereby reinforcing investor demand for safe-haven assets like silver.

Multiple Factors Resonating, Silver Market Outlook Has Points of Interest

The collision of geopolitical risks and monetary policy expectations has created favorable conditions for silver prices to rise. As long as tensions in the Middle East remain high and the Fed maintains its tightening stance, the appeal of silver as a safe-haven asset is unlikely to diminish.