Silver Price Forecast: XAG/USD stretches lower to near $24.90 amid a market caution

■  Silver price extends losses amid a market caution on Wednesday.

■  Fed is widely expected to maintain its current interest rates at March’s meeting.

■  The prolonging of higher interest rates dampens metal prices including Silver.

Silver price loses ground for the third consecutive session, trading lower near $24.90 per troy ounce during early European trading hours on Wednesday. Silver price encounters challenges as the market adopts a cautious stance ahead of the Federal Reserve (Fed) interest rate decision.

The Fed is widely expected to maintain its current interest rates at March’s policy meeting. However, the potential for a hawkish tone from the Fed could exert pressure on metal prices, including Silver. Investors are closely monitoring the Fed's decision for any signals that may impact the future trajectory of interest rate cuts in 2024 and, consequently, metal prices.

Fed Chair Jerome Powell's press conference was a critical focal point. A hawkish stance from the Fed, suggesting prolonged high rates, could dampen demand for gold and its counterparts, reversing recent gains driven by rate cut expectations.

While other major central banks are expected to leave their current interest rates unchanged, market attention will focus on signals regarding the potential initiation of monetary easing. Inflationary pressures from the United States (US) prompted a readjustment of the probability of interest rate cuts in the June and July meetings by the Fed to around 59.2% and 76.0%, respectively. The prospect of higher interest rates has diminished the appeal of non-yielding assets like Silver.

Nevertheless, Silver could have received support from rising geopolitical tensions and an improved industrial outlook from China, the top metals consumer. China's industrial production, fixed asset investment, and retail sales have exceeded forecasts. The People's Bank of China (PBoC) has decided to keep policy rates unchanged at 3.45%.