Silver retreats as trade optimism, stronger US Dollar pressure demand

• Silver retreats as global risk sentiment improves and investors take profits.
• Trade optimism and a steadier US Dollar weigh on demand for safe-haven assets.
• Expectations of Fed interest rate cuts and US fiscal uncertainty continue to provide some medium-term support.

Silver (XAG/USD) trades around $48.35 on Wednesday at the time of writing, down 0.70% for the day, extending the previous session's sharp 7% fall. The metal remains under pressure as investors favor risk assets amid improving sentiment surrounding trade negotiations between the United States (US) and China.

Comments from US President Donald Trump on Monday, saying that a "really fair and really great" trade deal could be reached at the Asia-Pacific Economic Cooperation (APEC) Summit in South Korea next week, have boosted confidence in global markets. This has reduced the appeal of defensive assets such as Silver, while equity indices and cyclical commodities advance.

The US Dollar (USD) also stabilizes after its recent rebound. The US Dollar Index (DXY) holds near one-week highs, benefiting from short-covering and modest demand following the heavy sell-off in precious metals. A firmer Greenback typically makes Silver more expensive for non-US investors, adding to the downward bias.

Still, the broader outlook for precious metals remains constructive. The Federal Reserve (Fed) is widely expected to cut interest rates again at its October meeting, with markets pricing in a near-certainty of a 25-basis-point reduction according to the CME FedWatch tool. Lower rates reduce the opportunity cost of holding non-yielding assets like Silver.

Furthermore, the ongoing US government shutdown, now in its fourth week, continues to cloud the economic outlook and delay key data releases, such as the September Consumer Price Index (CPI) report finally due this Friday. This uncertainty, combined with persistent geopolitical risks, could keep safe-haven demand alive and help limit further downside in the medium term.