Silver retreats after hitting record high amid trade war fears, Fed rate cut bets

• Silver hits a new all-time high at $54.86 before retreating toward $53.00 on Thursday.
• Renewed US-China trade war fears and a prolonged US shutdown drive demand for safe-haven assets.
• Markets price in further Federal Reserve rate cuts, weakening USD and supporting precious metals.

Silver (XAG/USD) edges lower on Thursday, trading around $53.00 per ounce, down 0.25% for the day at the time of writing, after reaching a new all-time high of $54.86 earlier in the day. The grey metal remains one of the year's top-performing assets, up more than 80% year-to-date, supported by persistent global economic and political uncertainty.

Investors continue to seek safe-haven assets as US-China trade tensions escalate. US President Donald Trump told reporters on Wednesday that the dispute with China has now escalated into a "full-blown trade war."

When asked whether the standoff could become a prolonged conflict if talks with Chinese President Xi Jinping later this month fail, Trump replied, "We're in one now." The president defended his recent 100% tariff threat on Chinese imports, stating, "If we didn't have tariffs, we would be exposed as being a nothing."

His remarks reinforced market fears that the confrontation between Washington and Beijing could persist well beyond the upcoming summit, heightening uncertainty over global trade and growth.

At the same time, the US government shutdown, now entering its third week, is weighing heavily on market confidence. The prolonged funding deadlock has frozen the release of key economic data, making it harder for the Federal Reserve (Fed) to assess the health of the US economy.

Money markets are now almost fully pricing in a 25-basis-point rate cut at the October Fed meeting, followed by another reduction in December. This prospect, coupled with falling US Treasury yields, has weakened the US Dollar (USD) and boosted demand for precious metals.

According to ING, "short-term weakness in the Dollar remains difficult to interpret, but the combination of low yields, trade tensions and a paralyzed government is creating a favorable environment for safe-haven assets."