Silver ETFs Witness Steep Declines as Safe-Haven Demand Weakens
Silver exchange-traded funds (ETFs) experienced significant declines on Thursday, marking a sharp reversal from the brief recovery seen in the previous two sessions. The downturn was primarily driven by bullion futures opening sharply lower on the Multi Commodity Exchange (MCX), which broke the short-lived upward momentum that had begun on February 3.
Reports of US-Iran Talks Trigger Profit Booking
The catalyst for this selloff was reports indicating that upcoming talks between the United States and Iran in Oman on Friday have weakened the safe-haven appeal of precious metals. This development led to aggressive profit booking across the sector, with silver ETFs bearing the brunt of the declines during the trading session.
Among the hardest hit was the Axis Silver ETF, which plummeted to an intraday low of ₹216.86 from its previous close of ₹275, representing a substantial fall of approximately 21%. Other major funds, including HDFC Silver ETF, ICICI Prudential Silver ETF, Edelweiss Silver ETF, SBI Silver ETF, and Kotak Silver ETF, also suffered significant losses, declining between 12% and 17% as the selloff intensified throughout the day.
Silver and Gold Prices Follow Downward Trend
On the MCX, silver prices declined by 9% in today's deals, reaching an intraday low of ₹2,44,654 per kilogram. Gold prices similarly slipped around 3% to ₹1,48,455 per 10 grams. This downward movement came after both metals had posted gains for two consecutive sessions starting February 3, highlighting the volatility in the precious metals market.
The rebound earlier this week had followed a sharp three-day correction where prices dropped significantly despite no material change in underlying fundamentals. However, this recovery proved unsustainable as markets continued to adjust to the earlier excessive rally that had characterized trading in precious metals.
Recent Price Movements and Market Triggers
Between January 28 and February 2, silver and gold spot prices had fallen by 32% and 13%, respectively. In the two sessions that followed, they recovered 11% and 6.5%. Thursday's trade once again brought selling pressure back into the market, demonstrating the ongoing volatility.
According to market reports, the trigger for last Friday's heavy selloff was news that US President Donald Trump would nominate Kevin Warsh to lead the Federal Reserve, which unsettled global commodity markets. Adding to the pressure, MCX imposed additional margins on bullion futures after a periodic risk review. An extra margin of 4.5% on silver futures and 1% on gold futures across all variants came into effect from the beginning of February 5, 2026.
Broader Market Context and Expert Analysis
Earlier this year, precious metals had rallied strongly on the back of speculative positioning, geopolitical tensions, and concerns over the independence of the US central bank. According to Bloomberg, this rally ended abruptly last week, with silver recording its biggest ever single-day fall on Friday, while gold registered its sharpest decline since 2013.
NS Ramaswamy, Head of Commodity & CRM at Ventura, provided insight into the current market dynamics. "Steep pullbacks have been witnessed in Gold and Silver with acceleration to overextended levels. This has been supported partly by rebound in the US Dollar," he noted.
He further explained, "The damage caused to Silver was majorly on account of higher collateral requirements on hiking the margins forcing traders to liquidate their positions accelerating the price drop."
Market Outlook and Investment Strategy
Looking ahead, silver is expected to remain weak and trade in a consolidation band of $74 to $91, which translates to approximately ₹2,35,000 to ₹2,85,000. A breakdown below $74 could push prices toward $69, or around ₹2,20,000.
Ramaswamy noted that the longer-term bullish momentum for gold remains intact due to structural diversification trends, persistent macroeconomic and geopolitical risks, and continued central bank buying. Central banks purchased 230 tons of gold in Q4 2025, and buying is expected to stay above 800 tons through 2026.
In the near term, traders are advised to adopt a buy-on-dips and sell-on-rallies approach as volatility is likely to remain elevated in the precious metals market.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
