Silver Price Forecast: XAG/USD rises to near $28.50 on market caution

• Silver price appreciates as traders adopt caution on expectations of Israel responding to Iran's attack.
• The decline in the US Dollar provides support to advance Silver demand.
• The price of the white metal could struggle as the Fed may adopt a hawkish stance on its monetary tightening.

Silver price edges higher to near $28.50 per troy ounce during the European trading hours on Wednesday. The safe-haven bullion like Silver gains ground on the market caution. Investors are cautiously monitoring Israel's response to Iran's air strike on Saturday.

A Reuters article reported that the rescheduling of the third meeting of Israel's war cabinet, initially slated for Tuesday, has been moved to Wednesday. The purpose of this meeting is to discuss and deliberate on Israel's response to Iran's unprecedented direct attack.

Additionally, the mild downward correction in the US Dollar adds to the upside of the Silver demand. However, the US Dollar Index (DXY) maintains a position near its five-month high of 106.51 reached on Tuesday. 2-year and 10-year US yields on US Treasury bonds stand at 4.96% and 4.65%, respectively, by the press time.

The expectations of the Federal Reserve (Fed) maintaining elevated interest rates for a longer duration, buoyed by a robust US economy and persistent inflation. Additionally, the hawkish remarks from the Federal Reserve Chair Jerome Powell, could support the US Dollar (USD). A stronger US Dollar (USD) tends to make silver more expensive to buy for investors using other currencies, which could impact the demand for the white metal.

On Tuesday, Federal Reserve Chair Powell remarked that recent data suggests minimal advancement in inflation this year, implying a prolonged period before reaching the 2% target. This statement potentially fostered a more hawkish sentiment and lent support to the US Dollar, according to Reuters.