Silver Price Forecast: XAG/USD advances to near $31.00 ahead of US CPI

• Silver price gains ground due to trade repositions ahead of the US inflation data release on Wednesday.
• The US Consumer Price Index may report an increase of 2.6% YoY in October, with core CPI rising by 3.3%.
• Silver prices may struggle as the implementation of Trump’s proposed policies could delay further rate cuts by the Fed.

Silver prices (XAG/USD) extends gains for the second consecutive day, trading around $30.90 per troy ounce during the European session on Wednesday. Silver prices gain momentum as traders seem to adjust their positions ahead of a crucial US inflation report, which could shape expectations for potential Federal Reserve interest rate cuts.

Softer-than-expected US CPI data could strengthen expectations for steady rate reductions by the Fed, likely increasing demand for non-interest-bearing precious metals like silver. However, the headline Consumer Price Index (CPI) is projected to show a 2.6% year-over-year increase for October, compared to the previous 2.4% reading. Meanwhile, core CPI is expected to rise by 3.3%.

However, the price of the dollar-denominated Silver remains under pressure from a strengthening US Dollar (USD), fueled by expectations of fiscal expansion and inflationary policies under the potential Trump administration. A stronger USD makes Silver more expensive for buyers holding foreign currencies, which negatively impacts the commodity's demand.

The implementation of Trump’s proposed policies could lead to increased investment, spending, and labor demand, heightening inflation risks. This scenario may prompt the Federal Reserve (Fed) to adopt a more restrictive monetary policy stance.

Weak economic data from China, combined with the absence of direct economic stimulus, has heightened concerns about demand in the world’s largest manufacturing hub. Silver is also under pressure due to its significant use in electrification, especially in solar panels.

Meanwhile, Chinese-owned solar panel manufacturers are reducing production, partly due to fears that a potential victory by Trump in the upcoming US election could result in higher tariffs on the industry. Morgan Stanley has forecast that the Trump administration might impose immediate tariffs of up to 60% on Chinese imports.