Silver Price Forecast: XAG/USD tumbles to near $53.50 on profit-taking

• Silver price falls to around $53.65 in Friday's early Asian session, losing 1.20% on the day. 
• Analysts warned of a short-term correction after Diwali, citing traders' profit-taking.
• Safe-haven demand and Fed rate cut bets could support the Silver price. 

Silver price (XAG/USD) slumps to near $53.65 during the Asian trading hours on Friday. The white metal retreats from a record high of $54.86 in the previous session. However, the potential downside for Silver might be limited amid robust safe-haven demand and US interest rate expectations. 

Analysts expect that silver prices might face some profit-taking, at least in the short run. With festive buying expected to taper off after Diwali, the market could begin to normalize. "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," said Renisha Chainani, head of research at Augmont, an integrated platform for gold and silver investments.

On the other hand, escalating trade tensions between the US and China, along with the geopolitical risk and US government shutdown, could boost the safe-haven flows, supporting the Silver price. US President Donald Trump began a trade war with China, raising concerns about long-term impacts on the economy, even as US Treasury Secretary Scott Bessent suggested a longer truce before raising tariffs further.  

Federal Reserve (Fed) Chair Jerome Powell on Tuesday signaled that the US central bank is on track to deliver another quarter-point reduction later this month. Traders are now pricing in nearly a 98% possibility of a 25 basis points (bps) Fed rate reduction in October, followed by another cut in December, which is fully priced in, according to Reuters. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.