The Spanish champions have won just one of their opening four matches in La Liga this season, but Silva fears that this could be the match when Madrid find their form.
Silva was reportedly a summer target for Los Blancos, but he signed a new five-year contract at City yesterday, committing himself to the club until 2017.
As third seeds in the group, City face a tall order to reach the Champions League knockout stages – as they found out last year by finishing third behind Bayern Munich and Napoli.
This time around they will face Madrid, Ajax and Borussia Dortmund, with arguably their most difficult match taking place tonight at the Bernabeu.
Silva said: “Maybe it is more dangerous because they are not at a good moment and we could awaken the beast in them. We have to be careful – they are a world–class team.”