During the early European session on Wednesday, silver prices (XAG/USD) traded with a soft tone near $27.30, with the easing of tensions in the Middle East and a prevailing risk-on sentiment constraining the upside potential of the white metal.
In recent weeks, geopolitical uncertainties in the Middle East, particularly between Israel and Iran, had driven up the prices of precious metals. However, these concerns have diminished significantly as both Iran and Israel have indicated a lack of interest in further escalation following earlier attacks this month. Consequently, traders have scaled back their positions in precious metals in favor of riskier assets.
Moreover, anticipation of a delayed easing cycle by the US Federal Reserve due to a robust economy and rising inflation pressures in the United States has weighed on the US Dollar-denominated silver. Market participants await further insights into the inflation trajectory and interest rate outlook from the US Q1 Gross Domestic Product (GDP) data scheduled for release on Thursday and the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred gauge of underlying inflation, due later on Friday.
On a positive note, silver continues to experience rising demand driven by its industrial applications in photovoltaics, semiconductors, and electric vehicle charging. Coupled with a significant deficit in silver supply, this trend may provide support to the white metal in the near term. According to the Silver Institute, industrial demand for silver reached a record high of 654.4 million ounces in 2023, driven by sustained structural growth in green economy applications.
