Silver price witnessed a sharp correction on Wednesday after touching record high levels in recent sessions. The fall came mainly due to profit-taking by traders, who decided to book gains after the strong rally seen over the past few days.
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Silver (XAG/USD) Price Retreats Sharply After Record Highs Due to Profit Booking
Silver (XAG/USD) is retreating sharply and trades around $109.40 on Thursday at the time of writing, posting a 6.50% decline on the day, after reaching a fresh all-time high at $121.66. Following a strong rally driven by safe-haven demand, the Silver market is taking a breather as investors lock in profits amid heightened volatility.
Read More: Silver Trading Plan: XAG/USD Hits $108 Target, Next Levels $112–$122 in Focus
Demand for precious metals remains underpinned by geopolitical tensions. US President Donald Trump has urged Iran to resume nuclear talks, warning that any future US strike would be far more severe. In response, Tehran has threatened retaliation against the United States (US), Israel and their allies, keeping uncertainty elevated and supporting safe-haven assets such as Silver.
US Debt Levels
According to Reuters, Marex analyst Edward Meir notes that rising US debt levels and the gradual fragmentation of the global trade system into regional blocs are encouraging investors to reduce exposure to a US-centric model and increase allocations to precious metals. This structural shift continues to support longer-term Silver demand despite short-term corrections.
Concerns over the independence of the US Federal Reserve (Fed) are also weighing on sentiment. The Trump administration is pursuing a criminal investigation into Fed Chair Jerome Powell and considering changes within the institution, increasing uncertainty around the future credibility of US monetary policy. Against this backdrop, the US Dollar (USD) struggles to regain sustained momentum, reinforcing Silver’s appeal as a hedge against currency risks.
Interest Rates Unchanged
On the macroeconomic front, the Fed keeps interest rates unchanged in the 3.50%-3.75% range while acknowledging that inflation remains elevated and economic uncertainty is still high. Recent labor market data point to ongoing resilience, but stabilizing unemployment and moderating job gains support a cautious stance from the central bank. According to Commerzbank, the Fed is in no rush to deliver further rate cuts unless economic indicators deteriorate meaningfully.
Overall, the current pullback in Silver prices appears largely driven by technical adjustments and profit-taking after an exceptional rally. Fundamentals, supported by geopolitical risks, political uncertainty in the United States and persistent US Dollar weakness, continue to argue in favor of sustained interest in Silver over the medium term.
FAQs
1. Why did silver prices fall after hitting record highs?
Silver prices declined mainly due to profit-booking by traders after a strong rally in recent sessions.
2. Is the fall in silver prices temporary?
Experts believe the correction is short-term, and the overall long-term outlook for silver remains positive.
3. What factors support silver prices in the long run?
Strong industrial demand, especially from solar panels and electric vehicles, continues to support silver prices.
4. Should investors buy silver at current levels?
Short-term traders should be cautious, while long-term investors may consider buying on dips.
5. What can affect silver prices next?
Global economic data, interest rate decisions, and movement in the US dollar will be key factors.
Disclaimer
This article is intended for educational purposes only. The views and opinions expressed are those of individual analysts or brokerage firms and do not represent the views of GoldSilverReports.com. Investors are strongly advised to consult certified financial experts before making any investment or trading decisions.
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