Silver (XAG/USD) slipped 0.2% on Tuesday, trading at approximately $48.60 per troy ounce, after reaching a 14-year high of $48.77 on Monday. This decline occurred as the US Dollar (USD) strengthened, affecting silver’s upward momentum.

The US Dollar Index (DXY) rose 0.4% to 98.53, boosted by political uncertainties in France and Japan, impacting the Euro (EUR) and Japanese Yen (JPY). France grappled with the resignation of its Prime Minister, while Japan faced potential policy shifts under new leadership, which intensified anticipation of monetary easing, influencing the JPY and DXY.

Despite stronger USD creating challenges for precious metals, expectations of the US Federal Reserve (Fed) adopting a more accommodative stance may support silver. Commerzbank predicts silver could reach $49 per ounce by year-end, with potential for further gains next year amidst continued geopolitical tensions.

Attention is on statements from Fed officials, such as Michelle Bowman, which may indicate future rate cuts. Clear signals of policy easing might boost silver demand, pushing it towards its record high of $49.80.

Silver’s decline on Tuesday does not undermine its uptrend, maintaining prospects for retesting the record high. However, the current bullish pattern appears extended, with the Relative Strength Index (RSI) in overbought territory. A drop below the uptrend channel, around $47.20, could lead to a broader correction, with support near $41.

Given that silver is consolidating near its 14-year high, we see the market balancing the promise of future Federal Reserve rate cuts against the current strength of the US Dollar. The dollar’s rise, fueled by political issues in France and Japan, is putting a temporary lid on prices. This creates a tense standoff for traders, with silver holding firm above key support levels.

The expectation of a Fed policy shift before the year ends remains the primary driver for a potential move higher. Looking back at the market reaction in late 2023 and early 2024, we saw silver rally over 15% in the months after the Fed first signaled its pivot away from rate hikes. Derivative traders could position for a repeat of this by purchasing call options with strike prices near the all-time high of $49.80, targeting expirations in December 2025 or January 2026.

However, we must respect the technical warnings, as the daily Relative Strength Index (RSI) has been in overbought territory above 70 since September 19. Historically, such extended overbought conditions have often preceded short-term price corrections of at least 5-8%. This suggests buying put options with a strike price around $47 could serve as a valuable hedge against a pullback toward the bullish channel’s support line.

Implied volatility is also a key factor, with the Cboe Silver ETF Volatility Index (VXSLV) now trading at 35.2, its highest point since the industrial metals scare we saw in August 2025. This elevated volatility increases the premiums on options, making strategies that involve selling them, such as cash-secured puts or credit spreads below the $47.20 support, particularly attractive. Traders can collect this high premium while betting that the uptrend will ultimately hold.

This week, speeches from Fed officials will be critical, as any surprisingly hawkish comments could trigger the feared correction. A viable strategy for the coming weeks could involve a “collar,” where a trader holding a long position buys a protective put option and simultaneously sells a call option against it. This would protect against a sharp drop while generating income, effectively creating a defined trading range until the Fed provides clearer direction.