Silver Price Forecast: XAG/USD rises above $29.50 amid thin trading activity

• Silver price gains ground as trading activity remains subdued before the Christmas holiday.
• The non-yielding Silver may struggle as traders factor in only two rate cuts next year.
• Concerns about potential tariffs from the incoming Trump administration have heightened fears of weakened industrial demand for Silver.

Silver price (XAG/USD) extends its winning streak for the third consecutive session, trading around $29.70 during the Asian hours on Tuesday. Prices of precious metals like Silver are supported probably due to thin trading activity before the Christmas holiday. Additionally, soft US PCE data have tempered inflation concerns, presenting a mixed outlook for the economy, which benefits non-yielding assets like Silver.

However, Silver prices may receive downward pressure as traders continue to assess the Federal Reserve's (Fed) outlook for 2025, factoring in only two rate cuts in 2025 after Fed policymakers signaled fewer interest rate cuts next year due to a slowdown in the disinflation process.

According to the CME FedWatch tool, markets now anticipate a nearly 93% probability that the Federal Reserve will keep interest rates unchanged in January, maintaining the current range of 4.25%-4.50%.

Potential tariffs from the incoming Trump administration have intensified fears of weak demand for Silver as an industrial input, causing the metal to underperform in the fourth quarter. Additionally, Chicago Fed President Austan Goolsbee stated that uncertainty surrounding Trump's policies after taking office led him to revise his projection for 2025. While he had previously anticipated a 100-basis-point (bps) interest rate reduction, he now expects fewer cuts.

Additionally, Silver prices are facing pressure from a constrained industrial outlook, driven by overcapacity in China's solar panel industry. This has led photovoltaic companies to participate in a government-led self-discipline program to regulate supply. Pressure on Silver prices was also noted due to concerns over a potential Yuan devaluation, in line with China's looser monetary policy stance.