In a dramatic reversal, silver prices on India's Multi Commodity Exchange (MCX) witnessed a sharp correction on Monday, December 29, plunging over 5% in evening trade after scaling an unprecedented peak earlier in the day. The white metal, which had soared past the ₹2,50,000 per kg mark for the first time, cooled off significantly as traders rushed to book profits following a monumental rally.
A Day of Highs and Lows for Silver
Monday's trading session was a rollercoaster for silver investors. The day began with the metal creating history by crossing ₹2.5 lakh per kg on the MCX. Silver March futures hit a record high of ₹254,174 per kg during the morning session, reflecting the intense bullish sentiment. However, the rally was short-lived. By around 8:00 PM, the same futures contract had nosedived, settling at ₹2,25,954 per kg. This represents a steep fall of 5.7% from the day's peak, highlighting extreme volatility.
The selling pressure showed no signs of letting up as the session progressed, with prices continuing to slide sharply. This pattern mirrored the action in international markets, where silver had briefly crossed the $80 per ounce mark for the first time earlier in the day before retreating.
Profit Booking After a Stellar Year
The primary driver behind the sudden drop was identified as profit booking by traders. Silver has been the standout asset of the year, delivering staggering returns. Year-to-date, silver has gained an astonishing 181%, significantly outpacing the performance of gold. This massive surge made a correction almost inevitable as investors chose to lock in gains.
Analysts point to the unique characteristics of the silver market that fuel such sharp moves. According to a Bloomberg report cited in the news, the silver market is thinner and less liquid compared to gold. This means that even moderate buying or selling activity can cause prices to swing violently in either direction. The rapid price ascent and the equally swift decline on Monday perfectly illustrated this dynamic.
Silver's Valuation Surpasses Tech Giant Nvidia
Despite the day's correction, the scale of silver's annual rally has led to a staggering milestone. As reported by Mint, the total market capitalization of silver has ballooned to approximately $4.65 trillion. This valuation has allowed it to edge past the world's most valuable company, chipmaker Nvidia, which was valued at around $4.63 trillion. This comparison underscores the sheer magnitude of capital that has flowed into the precious metal this year, transforming it from a mere industrial and ornamental commodity into a financial behemoth.
The event marks a crucial moment for commodity traders and investors in India, demonstrating the high-risk, high-reward nature of trading in assets like silver. While the long-term trend may still be influenced by global economic factors, Monday's price action serves as a stark reminder of the volatility inherent in such markets.
