Silver Prices Extend Losses on MCX Amid Global Market Recovery
Silver rates on the Multi Commodity Exchange (MCX) continued their downward trajectory on Monday, February 2, following a significant correction over the previous two trading sessions. The white metal has now plummeted more than 39% from its all-time high of ₹4,20,000, which was recorded on Thursday, January 30. This sharp decline highlights the intense volatility currently gripping the precious metals market.
Domestic and International Price Movements
On MCX, silver prices fell by 4% to hit a daily low of ₹255,652.00, reflecting sustained selling pressure in the domestic market. However, a contrasting trend emerged in global markets, where spot silver experienced a notable recovery, jumping over 8% to $84.140. This rebound came after an initial tumble of nearly 12% during early trading hours, indicating a volatile but resilient international sentiment.
Gold prices also faced declines on MCX during Monday's session, extending losses after witnessing their sharpest single-day fall in more than a decade. In contrast, international markets saw spot gold recover by as much as 1% after dropping 4% in early Asian trading, suggesting a divergence between domestic and global trends.
The Surge and Subsequent Selloff in Precious Metals
Over the past year, precious metals like gold and silver surged to unprecedented highs, catching even seasoned traders by surprise. The rally accelerated sharply in January as investors flocked to these safe-haven assets amid growing concerns over geopolitical instability, weakening currencies, and uncertainties surrounding the Federal Reserve's independence. Additional speculative buying from China further fueled this surge, driving prices to record levels.
The immediate trigger for Friday's steep selloff was the announcement that US President Donald Trump intended to nominate Kevin Warsh as the next Federal Reserve Chair. This development strengthened the US dollar and dampened sentiment among traders who had been positioning for a weaker currency under Trump's leadership. Warsh is widely perceived as a firm inflation hawk, raising expectations of tighter monetary policy that supports the dollar and negatively impacts dollar-priced bullion.
Further pressure on precious metals came from reports that CME Group decided to increase margin requirements on Comex gold and silver futures following the largest price swings seen in decades. According to the exchange, margin requirements for gold futures will be raised to 8% of the contract value from the existing 6% for non-heightened risk accounts. For heightened risk profiles, margins will increase to 8.8% from 6.6%.
For silver futures, margins will be increased to 15% from 11% for non-heightened risk profiles, while for heightened risk accounts, the requirement will rise to 16.5% from 12.1%. Margin requirements for platinum and palladium futures are also set to be increased, adding to the overall market pressure.
Analyst Insights and Investment Caution
Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, noted that going forward, silver is likely to remain highly volatile, with the potential for sharp and exaggerated price swings compared to gold. In the current environment, a cautious stance is advisable, with investors better off observing price behavior until volatility eases and clearer stability emerges.
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.
