Silver Price Forecast: XAG/USD attracts some sellers below $27.00 amid risk-on mood

• Silver price extends its downside near $26.95 on Tuesday. 
• The easing fear of wider tensions in the Middle East improves market sentiment.
• Reduced Fed rate cut speculation boosts the USD and drags the white metal lower. 

Silver price (XAG/USD) trades on a softer note for the second consecutive day around $26.95 on Tuesday during the early European session. The easing fear of wider Middle East tensions improves market sentiment and creates a headwind for the precious metal. Traders prefer to wait on the sidelines ahead of the US preliminary S&P Global Purchasing Managers Index (PMI) data for April, due later on Tuesday. 

The silver price drifts sharply lower to nearly three-week lows as concerns about a potential broader conflict in the Middle East fade, leading traders to reduce their precious metal positions and favour riskier assets. Iranian Foreign Minister Hossein Amirabdollahian stated on Friday that Iran does not plan to respond to Israel’s retaliatory strike, while Israeli authorities remained mostly silent. The absence of public statements afterward tends to imply that both sides are attempting to ease tensions. 

Additionally, the lower expectation for interest rate cuts from the US Federal Reserve (Fed) amid the robust. US economic data and hawkish stances from policymakers provide some support to the US Dollar (USD) and weigh on the US Dollar-denominated silver. New York Fed President John Williams noted that he doesn't feel urgency to cut interest rates, given the strength of the economy. Meanwhile, Chicago Fed President Austan Goolsbee stated that the Fed's current restrictive monetary policy is appropriate due to the robust US economic data. 

It’s worth noting that the higher-for-longer US rate narrative might dampen demand for white metal, a non-interest-bearing asset. The chance of a June cut has fallen to 15%, and the odds of a July cut have dropped below 45%. A September cut is not fully priced in, with the probability falling below 70%, according to the CME FedWatch Tool.