Silver is trading around $46.80 per troy ounce, subdued for the third day, due to a 3.78% drop linked to optimism over US-China trade talks. A framework agreement on tariffs has been reached, possibly leading to a final deal between Presidents Trump and Xi in South Korea.

US Treasury Secretary confirmed the removal of 100% tariffs on Chinese goods, and China agreed to increase soybean purchases and delay export controls. Despite this, silver’s downside is limited by a likely Federal Reserve rate cut, with a 97% chance of a 25 basis point reduction.

The Federal Reserve is considering a rate cut amid a US government shutdown and a weakening labour market, even as inflation exceeds their 2% target. Silver, used as a store of value and medium of exchange, is influenced by geopolitical instability, interest rates, and the US Dollar value.

Industrial demand, particularly in electronics and solar energy, affects silver prices, with demand from US, China, and India impacting swings. Silver often follows Gold price movements, guided by the Gold/Silver ratio, which signals potential undervaluation or overvaluation between the metals.

In the coming weeks, we see silver prices caught between opposing forces, creating a tense trading environment. On one hand, recent positive dialogue from the G7 summit on global trade standards has boosted market optimism, reducing the appeal of safe-haven assets. This reminds us of a similar dynamic back in late 2019 when hopes for a US-China trade deal caused a nearly 4% single-day drop in silver.

The key difference now is the Federal Reserve’s current stance. Back in October 2019, the market was almost certain of an impending rate cut, which provided a safety net for silver. Today in late 2025, the Fed has held its benchmark rate steady at 3.75%, but with the latest Core PCE inflation data for September coming in at a cooler-than-expected 2.6%, futures markets are now pricing in a 60% chance of a rate cut in the first quarter of 2026.

This expectation of lower rates should limit major downside for silver. As a non-yielding asset, silver becomes more attractive when interest rates fall, a fundamental factor that has not changed over the years. We see this tension creating significant price volatility, which presents opportunities for options traders.

Industrial demand also provides a much stronger floor for prices than it did in 2019. Global demand for silver in photovoltaics is on track to grow by over 15% this year, according to the latest industry reports from August 2025. This structural demand from the green energy transition means any price dips driven by short-term risk appetite may be viewed by many as a buying opportunity.

Given the conflicting signals, we believe traders should prepare for sharp price swings. A strategy of buying call options could capitalize on a dovish Fed surprise, while selling cash-secured puts allows for collecting premium if the price stays range-bound or for acquiring silver at a lower cost basis if it dips. The current high Gold/Silver ratio, hovering around 85, also historically suggests that silver is undervalued relative to gold, potentially favoring strategies with a bullish bias.