Silver rallies on safe-haven demand amid US-China tensions, Fed rate cut bets

• Silver resumes an upward march on Wednesday after the previous day's correction.
• Escalating US-China trade tensions and expectations of further Fed rate cuts boost safe-haven appetite.
• Weak US Dollar and prolonged government shutdown add to the bullish momentum in precious metals.

Silver (XAG/USD) resumes its rally on Wednesday, trading around $52.40 per troy ounce at the time of writing, up 2.40% on the day, as investors seek safety amid renewed global tensions and growing expectations of additional monetary easing by the US Federal Reserve (Fed). At current levels, Silver trades just below its record high of $53.77 marked on Tuesday

The precious metal remains buoyed by the deepening US-China trade conflict after US President Donald Trump threatened to terminate select trade ties with Beijing, accusing China of "economic hostility." The announcement has reignited fears of a broader economic fallout, with the International Monetary Fund (IMF) warning that prolonged tariff uncertainty could weigh on global growth and trade flows.

Meanwhile, the ongoing US government shutdown, now in its third week, adds another layer of uncertainty, reinforcing safe-haven demand for both Silver and Gold. The absence of key economic releases such as the Consumer Price Index (CPI) and Nonfarm Payrolls (NFP) deprives markets of crucial data to gauge the health of the US economy, fueling speculation that the Fed will continue easing its policy stance.

Fed Chair Jerome Powell recently acknowledged that the US labor market has "softened considerably" and that there are "significant downside risks" to employment. According to the CME FedWatch tool, markets are pricing in a 97% chance of a 25-basis-point (bps) rate cut in October and another in December. These expectations have pushed the US Dollar (USD) lower, further supporting non-yielding assets like Silver.

Adding to the geopolitical risk premium, reports of potential new US military aid to Ukraine and retaliatory rhetoric from Russia keep global sentiment fragile. In this context, Silver remains a hedge against both geopolitical instability and potential monetary debasement.