In a stunning rally, silver futures in India catapulted to an unprecedented peak, shattering previous records. The precious metal's surge underscores a potent mix of global economic signals and tangible supply-side anxieties gripping the market.
Historic Highs on the Multi Commodity Exchange
The most active July silver futures contract on the Multi Commodity Exchange (MCX) witnessed a dramatic ascent. It soared by ₹4,949, or 2.09 per cent, to settle at a historic ₹2,42,217 per kilogram. During the trading session, the contract even touched an intraday high of ₹2,42,550, showcasing intense bullish sentiment. This milestone performance on Tuesday, May 21, 2024, marks a new chapter for the commodity often seen as gold's more volatile sibling.
Analysts point to a confluence of factors propelling this record-breaking run. The primary driver is the growing market consensus that the US Federal Reserve will initiate interest rate cuts later in the year. Lower interest rates diminish the opportunity cost of holding non-yielding assets like silver, making them more attractive to investors. This expectation is weakening the US dollar, further boosting dollar-denominated commodity prices globally.
Global Cues and Domestic Market Dynamics
The rally was not confined to Indian markets. Internationally, spot silver mirrored the bullish trend, jumping 2.3 per cent to $31.66 per ounce. This synchronized global upswing provided a firm foundation for the surge on the MCX. Market participants are closely tracking statements from Federal Reserve officials for clearer signals on the timing and pace of monetary policy easing.
Beyond macroeconomic factors, specific supply fears are adding fuel to the fire. Concerns over potential supply shortages from key mining regions are creating a tightness in the physical market. Silver, crucial for industrial applications in solar panels, electronics, and electric vehicles, faces robust demand against a constrained supply outlook. This fundamental imbalance is providing strong underlying support to prices, suggesting the rally may have a solid floor.
Broader Commodity Market and Outlook
The bullish wave also lifted other precious metals. On the MCX, June gold futures gained ₹136, or 0.19 per cent, to close at ₹72,765 per 10 grams. In the energy complex, June crude oil futures edged higher by ₹11, or 0.14 per cent, to settle at ₹6,577 per barrel. The positive sentiment across commodities indicates a broader risk-on approach among investors, shifting assets away from traditional bonds and currencies.
Looking ahead, market analysts remain cautiously optimistic about silver's trajectory. The dual demand—as a monetary safe-haven asset and an industrial commodity—positions silver uniquely. While profit-taking and corrections are always possible after such a sharp rise, the foundational drivers of expected Fed rate cuts and industrial demand appear strong. Traders will monitor upcoming US economic data and Fed commentary for directional cues, as any delay in rate cuts could temporarily dampen the rally. However, the prevailing sentiment suggests that silver may have entered a new, higher trading range, with investors keenly watching for the next target.
