Silver Price Forecast: XAG/USD bounces back to near $29.50 due to increased risk aversion

• Silver prices appreciate as traders adopt caution ahead of the incoming Trump administration.
• The non-yielding Silver may face challenges due to the little hawkish outlook for the Fed's interest rates in 2025.
• The safe-haven Silver could gain support as Israeli forces carried out attacks on two hospitals in northern Gaza on Sunday.

Silver price (XAG/USD) recovers its recent losses from the previous session, trading around $29.50 per troy ounce during the Asian hours on Monday. However, trading volume is lighter than usual ahead of the New Year holiday.

The safe-haven Silver appreciates as traders anticipate signals regarding the United States (US) economy under the President-elect Trump administration and the Federal Reserve's (Fed) interest rate outlook for 2025.

The potential for Donald Trump's tariffs and trade policies could trigger trade conflicts, increasing the risk aversion sentiment and supporting the demand for safe-haven assets like Silver. However, the outlook for fewer Fed rate cuts in 2025 might cap the upside for the price of the non-yielding Silver. The Fed cut its benchmark interest rate by a quarter point at the December meeting, and the latest Dot Plots indicated two rate cuts next year.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, hovers around 108.00, slightly below its highest level since November 2022. Any further strengthening of the Greenback could limit the upside of the dollar-denominated precious commodities like Silver, as a stronger USD makes these assets more expensive for holders of other currencies.

Additionally, the safe-haven demand for Silver could gain upward support from heightened geopolitical risks stemming from the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East. On Sunday, Israeli forces carried out attacks on two hospitals in northern Gaza, including a strike on the upper floor of al-Wafaa Hospital in Gaza City, which killed at least seven people and critically wounded others.