Silver Price Forecast: XAG/USD loses traction below $31.50 as Fed officials signal cautious path for rate cuts

• The price of Silver attracts some sellers near $31.20 in the early stages of the European session on Thursday, with a drop of 0.30% on the day.
• The cautious approach to rate cuts by the Fed drags down the price of Silver.
• Increasing industrial demand for Silver could help limit its losses.

The price of Silver (XAG/USD) falls to around $31.20, breaking a two-day winning streak during the European session on Thursday. The cautious stance on rate cuts by the Federal Reserve (Fed) weighs on the white metal.

Fed Chair Jerome Powell said Wednesday that the strength of the U.S. economy means the U.S. central bank can afford to be a little more cautious” about decisions on rate moves. Joseph Brusuelas, economist RSM US chief, noted that he does not expect further rate cuts after the December meeting until March 2025 at the earliest.

Increasing bets on less aggressive Fed rate cuts could support the dollar and weaken the price of the USD-denominated commodity. Markets are now pricing in a 76% chance that the central bank will cut rates by a quarter point at its December 17-18 meeting, according to CME’s FedWatch tool.

On the other hand, the silver market is expected to experience a supply shortfall for the fourth consecutive year due to strong demand. This, in turn, could provide some support to the price of Silver. Carsten Fritsch, precious metals analyst at Commerzbank, said, “Demand for silver for photovoltaics has more than doubled in the last three years and now almost equals demand for bars and coins.” Fritsch added that rising industrial demand will likely boost physical demand for silver this year, reaching its second-highest level after 2022.