Silver prices climb 5% to 3-week high as US-Iran deal hopes cool inflation worries

Spot silver topped $81 per ounce on Thursday for the first time since April 17, extending gains from the previous session as a sharp decline in oil prices eased inflation concerns.

The precious metal rose nearly 5% as of 1205GMT, supported by expectations that lower energy prices could reduce inflationary pressure and ease the need for central banks to keep monetary policy restrictive for longer.

Meanwhile, gold prices also rose, with the spot gold gaining 1.1% to reach $4,740 per ounce.

Oil prices tumbled after reports indicated that the US had sent a one-page memorandum of understanding through Pakistani mediators aimed at formally ending the conflict with Iran and potentially allowing the gradual reopening of the Strait of Hormuz.

Tehran is expected to respond in the coming days after confirming it was reviewing a US peace proposal, while broader negotiations over Iran's nuclear program are expected to follow later.

The prospect of lower energy costs helped lift investor appetite for precious metals, as reduced inflation risks could support expectations for lower bond yields and a softer monetary policy outlook.

Silver, which is used both as an investment asset and an industrial metal, has been sensitive to shifts in inflation expectations, interest-rate outlooks and global risk sentiment since the outbreak of the US-Iran conflict.

However, Federal Reserve Bank of Chicago President Austan Goolsbee warned that inflation has not continued to cool toward the US central bank's 2% target and has instead accelerated since the start of the war, signaling that policy risks remain despite the latest fall in oil prices.