Silver (XAG/USD) extends its pullback during the Asian session on Friday, dropping to around $53.65 after touching a record high of $54.86 on Thursday. The decline appears driven by profit-taking following the recent sharp rally, though safe-haven demand and dovish Federal Reserve (Fed) expectations may help cushion further losses.
Short-term correction as festive demand fades
Market participants attribute part of the latest decline to waning physical demand following the festive season. Renisha Chainani, Head of Research at Augmont Gold and Silver Investments, noted that volatility could subside once post-Diwali demand fades:
“This volatility is likely to ease after the festive demand tapers off. Post-Diwali, we might see the market normalizing as arbitrage returns and premiums compress. I expect this to start from next week onwards.”
This suggests a short-term cooling in the silver market as traders lock in profits from recent record highs.
Safe-haven demand underpins downside resilience
Despite the correction, the downside in silver prices appears limited. Renewed US-China trade tensions, coupled with the US government shutdown and lingering geopolitical risks, continue to support safe-haven demand for precious metals.
US President Donald Trump’s decision to escalate tariffs on Chinese goods has reignited trade war concerns, while Treasury Secretary Scott Bessent hinted at a possible truce before any further tariff hikes. These developments have raised fears of slower global growth, bolstering demand for defensive assets like gold and silver.
Fed rate cut expectations support the white metal
On the monetary front, Fed Chair Jerome Powell reiterated earlier this week that the US central bank remains on track to deliver another 25 basis-point rate cut at its upcoming meeting. Market participants now see a 98% probability of a rate reduction in October and another in December, according to Reuters.
Lower borrowing costs tend to reduce the opportunity cost of holding non-yielding assets like silver, thereby supporting prices.
Technical outlook
From a technical perspective, the $53.50 region represents immediate support, followed by $53.00 and $52.40 (the 23.6% Fibonacci retracement of the latest rally). A break below these levels could expose the next major floor near $51.80.
On the upside, resistance is seen at $54.00, followed by $54.50 and the all-time high at $54.86. A sustained move above that threshold could pave the way for a test of the $55.50–$56.00 zone.
