Silver prices fall as global risk sentiment improves, with trade optimism and a stronger US Dollar reducing demand for safe-haven assets. Expectations of interest rate cuts by the Federal Reserve and fiscal uncertainty in the US still provide medium-term support.

Silver is trading around $48.35, down 0.70% from the previous day, following a sharp 7% drop. Improved sentiment around US-China trade talks contributes to the preference for riskier assets over defensive ones like Silver.

Comments from President Trump suggest a promising trade deal at the upcoming APEC Summit, boosting market confidence. This reduces the appeal of Silver as equity indices rise.

The US Dollar stabilises, benefiting from demand after a sell-off in precious metals. A strong Dollar usually makes Silver more expensive for non-US buyers.

The overall outlook for precious metals remains positive. The Federal Reserve is expected to cut rates at its next meeting, with a 25-basis-point reduction likely. Lower rates lower the holding cost of non-yielding assets like Silver.

The US government shutdown continues, affecting economic forecasts and delaying data releases. Despite this, geopolitical risks and economic uncertainty may sustain demand for safe-haven assets like Silver.

We are seeing a familiar pattern in silver, which is currently trading around $31.50 after a pullback from recent highs. Much like the dynamic we observed back in late 2019, the market is torn between strong underlying demand and shifting monetary policy signals. This tension creates opportunities for traders who can navigate short-term volatility.

The Federal Reserve’s current stance provides a significant tailwind for silver prices in the coming weeks. The CME FedWatch tool now shows a greater than 70% probability of a 25-basis-point rate cut before the year’s end, reducing the opportunity cost of holding silver. Derivative traders should be positioning for this, as lower rates historically boost non-yielding assets.

Unlike situations in the past where a strong dollar created headwinds, the US Dollar Index (DXY) is now providing support. The DXY is hovering near six-month lows around 101.5 as markets continue to price in future Fed easing. A weaker dollar makes silver more affordable for foreign buyers, providing a solid base against sharp sell-offs.

We must not overlook the industrial demand component, which is far more robust today than it was several years ago. Global demand from the solar and electric vehicle sectors is on pace to consume a record 632 million ounces in 2025, according to the latest industry reports. This provides a strong fundamental floor, suggesting that buying call options on significant dips could be a sound strategy.

The gold-to-silver ratio currently sits near 85, which is high by historical standards and signals that silver may be undervalued relative to gold. Looking back, ratios this elevated have often preceded periods where silver outperforms gold on a percentage basis. This suggests that pair trades, or outright long silver positions, could be favorable as we anticipate a potential reversion.