Silver prices fell to about $53.65 in early Asian trading on Friday, dropping 1.20%. This decrease is due to profit-taking following the Diwali festival. Recently, silver hit a peak of $54.86. Although a decline is happening, demand for silver as a safe-haven asset and expected US interest rate changes may limit further drops. After Diwali, analysts predict the market will stabilize as festive buying slows down. Ongoing trade tensions between the US and China and other geopolitical risks are likely to keep demand for safe assets like silver strong. The US-China trade war raises concerns about economic effects, and the potential for a US government shutdown adds to the uncertainty. US Federal Reserve Chair Jerome Powell signaled a possible interest rate cut soon. Traders see a 98% chance of a 25 basis point reduction this month, with another cut likely in December. Lower interest rates can support silver prices by decreasing the opportunity cost of holding it. Silver is a sought-after investment because of its historical value, industrial uses, and role as a hedge against inflation. It typically trades opposite to the US Dollar and moves alongside gold prices, making it a valuable investment choice. Currently, silver is pulling back to the $53.50 range after reaching a high of $54.86. This short-term correction is a result of traders cashing in their profits. The decline follows the Diwali festival, which ended on October 20th, indicating that peak physical demand may be easing. For derivative traders, this creates a chance for bearish strategies in the near term. With a normalization expected in the market after Diwali, buying put options with strikes below $53 could be a way to take advantage of a potential dip. This volatility is likely temporary, allowing for short-duration trades. However, we view any major weakness as a buying opportunity because of strong underlying support. The CME FedWatch Tool indicates a 98% chance of a Federal Reserve rate cut this month, which lessens the opportunity cost of holding silver. Lower rates are beneficial for precious metals. Apart from monetary policy, geopolitical risks and strong industrial demand support silver prices. Ongoing trade tensions and the approaching US budget deadline maintain interest in safe-haven assets. Additionally, recent data from the International Energy Agency shows that global solar panel installations—a key source of silver demand—are expected to grow by 15% this year. We should keep an eye on the gold-to-silver ratio to assess relative value. If this ratio widens during the pullback, it could mean silver is becoming undervalued compared to gold. This would support the case for taking long positions in silver, possibly through call options or futures, in anticipation of a rebound.

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