(Kitco News) – Gold and silver prices are rallying along with equities as markets digest the ceasefire deal between the United States and Iran, but elevated inflation is acting as a persistent headwind for the precious metals as rate expectations adjust to price increases, according to precious metals analysts at Heraeus.
In their latest update, the analysts noted that gold continued to decline last week even after the US-Iran ceasefire appeared to be finalized, but precious metals have rallied on the confirmation of the deal.
“The CPI rose 4.2% year-on-year in May and now sits above both the Federal Reserve’s target rate range (3.50% to 3.75%) and the 2-year Treasury yield (4.05%),” they wrote. “Meanwhile, core CPI was up by 2.9% and although the month-on-month core reading of 0.2% was under the 0.3% estimated, the market is continuing to price in interest rate rises to combat these price rises.”
“While the Federal Reserve is not expected to change the headline rate during the 17 June FOMC meeting, the probability of at least one rate hike by the 9 December meeting is currently hovering at around 60% as of 15 June.”
Meanwhile, central bank demand has remained strong as the gold price has declined. “The People’s Bank of China (PBoC) added 9.95 tonnes of gold in May, marking 19 consecutive months of accumulation,” the analysts said. “This brings China’s total reserves to 2,331 tonnes, up by 23.6 tonnes year-to-date. China’s reserves are the fifth largest in the world, behind the US, Germany, Italy and France.”
Central banks also flipped back to being net buyers in April after March’s strong selling. “Poland was the largest buyer of gold in April, having bought 14 tonnes in the month,” they wrote. “To the end of April, Poland had bought 45 tonnes of gold this year, the most of any country.”
Spot gold hit a session high of $4,369.66 on Monday morning, last trading at $4,364.84 for a gain of 3.47% on the session.
Turning to silver, Heraeus analysts said new silver production is in the pipeline from Mexico.
“Minera Frisco is advancing a new silver operation at Ocampo Mining in Durango province after having received environmental permits in November 2025,” they said. “The project is expected to be online by the end of this year and begin contributing ore production by Q1’27. The first phase production target for this mine is 30 million silver-equivalent ounces.”
Minera Frisco is also restarting the San Felipe project in Baja California in Northwestern Mexico. “Scheduled to be online by the end of June 2026, the project is expected to incrementally increase Minera’s production from H2’26,” the analysts noted. “These moves come as many projects are struggling to get approval following Mexico’s mining law changes that were introduced in 2023, which made the permitting and concession process stricter and slower. Minera Frisco’s silver output was 1.51 moz in Q1’26, up 45% year-on-year from 1.04 moz in Q1’25. Its total silver production for 2025 was 4.27 moz.”
And the expectation of higher-for-longer interest rates is acting as a headwind for silver. “Since news of the US-Iran ceasefire agreement broke on 14 June, the silver price has rallied back above the $70/oz level, however, a high CPI number, 4.2%, has entrenched the market view of a higher-for-longer interest rate environment,” Heraeus said. “During the 17 June FOMC meeting, the Fed will produce a Summary of Economic Projections that will give some clarity on how it is viewing the implications of the current spike in prices.”
“While silver is viewed as a precious metal, along with gold, it is also much more exposed to industrial demand,” the analysts pointed out. “The current higher interest rate expectations suppress demand for silver from an investment perspective, and worsening economic conditions are likely to dampen industrial demand.”
Silver prices are also trading near the top of their daily range on Monday morning.
Spot silver last traded at $70.880 per ounce for a gain of 4.18% on the daily chart.
