Silver Price Forecast: XAG/USD retreats from near three-year highs below $28.00

• Silver price loses momentum near $27.85 as USD strengthens on Thursday.
• Precious metals traders do not seem too worried about US inflation reports, which came in higher than expected.
• The increase in industrial demand and the escalation of geopolitical tensions in the Middle East drive the price of Silver.

The price of Silver (XAG/USD) is trading with slight losses around $27.85, after retreating from the new three-year high reached early Thursday in the European session at $28.53. The decline in speculation that the Federal Reserve (Fed) will cut interest rates in June drags the gray metal lower. Investors await the release of the March Producer Price Index (PPI) in the US on Thursday for new data.

Traders sharply reduced bets on a Fed rate cut on Wednesday after US inflation exceeded expectations and US President Joe Biden acknowledged there is still work to be done. do to combat rising prices. The US Consumer Price Index (CPI) report for March suggested that the inflation easing path remains extremely bumpy and the US central bank is likely to maintain the higher rates narrative for longer. This could limit silver's gains as the gray metal loses appeal compared to interest-bearing assets. According to CME's FedWatch tool, the Fed funds futures market has shifted expectations of the first rate cut from June to September.

On the other hand, the increase in industrial demand and its attractiveness as an alternative hedge against inflation could limit the fall in Silver prices. Furthermore, ongoing geopolitical tensions in the Middle East and its appeal as an alternative inflation hedge could lift Silver prices in the short term, as Israel and Hamas rejected ceasefire talks and Iran promised retaliation for an airstrike against its embassy in Syria.