MCX Silver Prices Stabilize in Narrow Range After Steep 40% Plunge
Silver prices on the Multi Commodity Exchange (MCX) are currently moving within a confined trading band, marking a period of consolidation after experiencing a dramatic and sharp correction from the peak levels achieved towards the end of January. The powerful rally in the white metal, which commenced last year, came to an abrupt halt as investors aggressively engaged in profit-booking, citing concerns over overextended valuations following the substantial and rapid price ascent.
Anatomy of the Rally and Subsequent Correction
Domestic spot market silver prices had skyrocketed by an impressive 168% throughout the previous year. This remarkable surge was fueled by a combination of critical factors: a significant supply squeeze, escalating industrial demand from high-growth sectors like solar energy and electronics manufacturing, and heightened sensitivity to a weakening US dollar. The bullish momentum spilled over into the current year, propelling MCX silver prices to breach the psychologically significant ₹4,20,000 per kilogram mark.
However, this upward trajectory proved to be short-lived. A pivotal turning point emerged following the nomination of inflation hawk Kevin Warsh by former President Donald Trump for the position of the next US Federal Reserve Chair. This development strengthened the US dollar, consequently dampening investor appetite for non-yielding precious metals like silver. With prices already considered stretched after their rapid climb, this news triggered a wave of heavy profit-taking. In a stunning three-session span from January 30 to February 2, silver prices nearly halved, inflicting severe losses on market participants.
From its zenith, MCX silver has now declined by approximately ₹1,59,000, representing a substantial 40% correction. This has resulted in steep financial setbacks for investors who entered the market near the peak levels. While prices are currently attempting to stage a recovery, climbing 3% on MCX as of February 11, market analysts are issuing cautions that this recent bounce may encounter significant resistance unless it is bolstered by strong and confirming technical signals.
Analyst Insights and Technical Outlook
Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, emphasized that the current price increase cannot yet be classified as a confirmed reversal. "After such an extended rally to ₹4,20,000, silver required both time correction and price correction. The observed Bollinger Band contraction suggests a compression in volatility, which typically precedes a larger directional move. However, for the bounce to be sustainable, we need to see prices trade consistently above the mid-band with improving trading volumes; this would reduce the probability of a 'dead cat bounce'," he explained.
Modi provided a detailed technical perspective, noting that the current price level aligns with prior breakout support and the lower band of the daily Bollinger Bands. "The recent rebound has pushed prices back toward the mid-band, represented by the 20-period simple moving average, but it has yet to decisively reclaim this level. Structurally, the chart is forming a broad immediate rectangle pattern between ₹2,25,000 and ₹2,85,000 following the vertical fall." He believes that unless silver prices achieve a daily close above the ₹2,85,000–₹3,00,000 zone, which corresponds to the upper Bollinger Band expansion area, the current move remains merely a pullback within a broader consolidation phase. He identifies immediate support at ₹2,25,000, warning that a fall below this level could expose prices to a test of ₹2,00,000. "The near-term outlook is range-bound with a cautious bias. However, from a longer-term perspective, the higher-timeframe structure still favors a 'buy-on-dips' investment approach, provided the ₹2,00,000 support level holds firm."
Ponmudi R, CEO of Enrich Money, concurred that MCX Silver's short-term momentum is currently under pressure. "The ₹2,25,000–₹2,60,000 support band remains absolutely crucial for the metal's near-term direction. Sustained price stability above ₹2,66,000, followed by strong follow-through buying, could potentially push prices toward the ₹2,75,000–₹2,80,000 range." He suggested that any price decline towards the identified support zone may offer opportunities for positional accumulation for long-term investors. However, he issued a stern caution that a decisive and sustained break below this critical support band could accelerate a downside extension, leading to further losses.
Disclaimer: This news analysis is intended for educational purposes only. The views, opinions, and investment recommendations expressed herein are solely those of the individual analysts or broking firms quoted and do not represent the stance of Bharat Horizon. We strongly advise all investors to consult with certified financial experts and conduct their own thorough research before making any investment decisions in the commodities market.
