Silver prices fell 7% on Tuesday, trading around $48.70, after recently reaching multi-year highs near $55. Profit-taking followed an increase in the US Dollar and an upbeat market mood.

Growing optimism about US-China trade progress reduced the demand for safe-haven assets. Announcements from President Donald Trump about a potential trade deal at the upcoming APEC Summit boosted global risk assets, decreasing interest in Silver.

The Strengthening Dollar

The strengthening US Dollar added pressure on Silver’s value. The US Dollar Index rose to nearly one-week highs around 98.90, making dollar-priced commodities like Silver costlier, accelerating the decline.

Despite current trends, Silver’s broader outlook remains positive, with expectations of a Federal Reserve interest rate cut. Lower rates typically enhance the appeal of non-yielding assets such as Silver. Ongoing geopolitical risks also support safe-haven investments.

Silver serves as a store of value and can diversify portfolios or act as a hedge against inflation. Factors affecting Silver prices include geopolitical concerns, interest rates, and US Dollar strength. Industrial demand in electronics and solar energy sectors further influences its market value.

Silver’s pricing often follows Gold due to their similar safe-haven appeal. The Gold/Silver ratio helps assess the relative valuation of the two metals, guiding market expectations.

We’ve seen this kind of price action before, like the sharp pullback in late 2019 when profit-taking hit the market hard. Today, October 21, 2025, silver is facing similar pressure, trading around $31.50 after recently failing to sustain a rally above $33. This suggests traders are once again locking in gains, creating headwinds for bullish derivative positions in the immediate term.

Broader Risk-on Sentiment

A broader risk-on sentiment is weighing on safe-haven assets, much like the trade optimism did years ago. Ongoing positive talks surrounding a new US-European Union trade pact are boosting equities, reducing the immediate need for defensive plays like silver. Recent data showing US corporate earnings beat expectations for the third quarter has further fueled this confidence.

The US Dollar is also playing a key role, just as it did in the past correction. The US Dollar Index (DXY) is currently strong, hovering near 106.50, making silver more expensive for buyers using other currencies. This strength is supported by the Federal Reserve’s decision to hold interest rates steady in September, with markets now pricing in only a 20% chance of a rate cut before 2026.

Despite these short-term pressures, we see underlying factors that could limit the downside for silver derivatives. The gold-to-silver ratio remains historically high at around 88, which some traders interpret as a sign that silver is undervalued relative to gold. This could attract buying interest on significant dips, making put options further out of the money a risky sell.

Furthermore, industrial demand provides a solid floor for silver prices. Global investment in green energy infrastructure, particularly solar panel manufacturing, continues to accelerate, with government data from earlier this year showing a 15% year-over-year increase in silver offtake for the sector. This consistent industrial consumption is a key structural support that was less of a focus during the trade-war driven markets of 2019.

Create your live VT Markets account and start trading now.