Insights 
VT 
Silver prices decline to around $53.65 in early Asian trading on Friday, dropping 1.20% as traders engage in profit-taking after the Diwali festival. Silver had recently reached a record high of $54.86 but might see limited downside due to constant safe-haven demand and expected US interest rate changes.
After Diwali, analysts foresee a normalisation in the market as festive buying decreases. The impact of heightened trade tensions between the US and China, along with other geopolitical risks, could continue to bolster the demand for safer assets like Silver. The ongoing US-China trade war raises concerns about economic impacts, while the potential for a US government shutdown also looms.
US Federal Reserve Chair Jerome Powell indicated an upcoming interest rate cut, with traders anticipating a 98% probability of a 25 basis point reduction this month. Another cut in December is also considered likely. Lower rates may support Silver prices by reducing the opportunity cost of holding the non-yield-bearing asset.
Silver remains a popular investment due to its historical value, industrial usage, and as a hedge against inflation. It trades inversely to the US Dollar and moves in tandem with Gold prices, maintaining its status as a valuable investment option.
We are seeing silver pull back to the $53.50 range after recently hitting a record high of $54.86. This appears to be a short-term correction driven by traders taking profits. The timing is linked to the Diwali festival, which concludes on October 20th, suggesting that peak physical demand may soon taper off.
For derivative traders, this creates an opportunity for near-term bearish strategies. With the market expecting a post-Diwali normalization next week, buying put options with strikes below $53 could be a way to capitalize on a potential dip. This volatility is seen as temporary, so these should be considered short-duration trades.
However, we believe any significant weakness should be viewed as a buying opportunity due to strong underlying support. The CME FedWatch Tool shows a 98% probability of a Federal Reserve rate cut later this month, which lowers the opportunity cost of holding silver. Lower interest rates are a powerful tailwind for precious metals.
Beyond monetary policy, geopolitical risks and robust industrial demand provide a solid floor for prices. Lingering trade frictions and the looming US budget deadline sustain safe-haven interest. Furthermore, recent data from the International Energy Agency shows global solar panel installations, a key source of silver demand, are on track to grow 15% this year.
We should also monitor the gold-to-silver ratio to gauge relative value. If this ratio widens during the pullback, it could signal that silver is becoming undervalued compared to gold. This would present a strong case for entering long silver positions, perhaps through call options or futures, in anticipation of a rebound.
