Market Analysis

The silver price (XAG/USD) continues its rally, reaching near $32.25 during early European trading hours on Wednesday. This marks the fourth consecutive day of gains for the white metal, driven by increasing industrial demand. However, investors are closely monitoring upcoming key US economic data for further direction. The preliminary US Gross Domestic Product (GDP) figures for Q1 will be released on Thursday, followed by the Core Personal Consumption Expenditures Price Index (PCE) on Friday.

The Silver Institute has projected that total industrial demand for silver will rise by 9% to 711 million ounces, primarily fueled by the photovoltaic sector. 

UBS analysts are forecasting a significant shortfall in the silver market, with an anticipated undersupply of 215.3 million ounces for the year, equating to 17% of global demand. This potential supply deficit could further boost silver prices.

Additionally, escalating geopolitical tensions in the Middle East may also support higher silver prices. Israeli Prime Minister Benjamin Netanyahu has pledged to continue the conflict against Hamas, despite international condemnation following an air strike in Rafah that resulted in at least 45 deaths on Sunday, according to the BBC.

Conversely, stronger US economic data and hawkish signals from the Federal Reserve (Fed) could limit further gains for silver. On Tuesday, Fed Minneapolis President Neel Kashkari stated that the central bank should await significant progress on inflation before cutting interest rates, indicating that he expects no more than two rate cuts in 2024. High interest rates typically reduce investor sentiment and demand for silver.

Paraphrasing text from "FX Street" all rights reserved by the original author.