Spot silver prices (XAG/USD) extended gains for a second consecutive session, rising as much as 1.2% to $78.26 per ounce during Asian trading hours on Thursday, May 7. The metal was last trading near $77.50 per ounce, buoyed by market optimism surrounding a potential agreement between the United States and Iran.

The prospect of a US-Iran deal has eased inflation concerns, providing upward momentum for the non-yielding asset. Expectations of a diplomatic breakthrough triggered a sharp decline in oil prices, which in turn reduced fears of persistent inflation and weakened market expectations for major central banks to maintain hawkish policies for an extended period.

However, Chicago Fed President Austan Goolsbee issued a cautionary note, warning that inflation has not continued to decline toward the Fed's 2% target since the conflict began and has instead accelerated, adding uncertainty to the outlook for silver prices.

According to a BBC report on Wednesday, Iran stated that a US proposal to end the conflict is "still under review," despite earlier indications that the two sides might be close to an agreement. The report indicated that the US has submitted a one-page memorandum of understanding to Iran, proposing a gradual reopening of the Strait of Hormuz and an easing of the US blockade on Iranian ports. Discussions regarding Iran's nuclear program would take place in a later phase, with no final agreement yet reached.

Meanwhile, CNBC reported that US President Donald Trump warned that Iran would face bombing at a "higher level" if it refuses to agree to a peace deal. In a post on Truth Social, Trump stated that the military operation, codenamed "Operation Fury," would end if Iran "agrees to what has already been agreed upon."

Overall, the prospects for US-Iran negotiations remain a key variable influencing silver's short-term trajectory. Should the agreement make substantial progress, further easing inflationary pressures, silver prices could continue to find support. Conversely, if talks break down and geopolitical tensions escalate again, safe-haven demand could reignite interest in silver.

Investors are also monitoring the US non-farm payrolls report due on Friday, as the data may influence expectations for Federal Reserve policy and subsequently impact silver prices.

Institutional analysts widely believe that gold's medium-to-long-term upward trend provides a "significant anchor" for silver. Goldman Sachs maintains its forecast for gold to reach $5,400 per ounce by the end of 2026, while Bank of America has raised its average gold price forecast for 2026 to $5,093. The gold-silver ratio remains at historically elevated levels, suggesting potential for silver to play catch-up if gold continues to advance.