The recent explosive rally in silver prices came to a screeching halt on Thursday, July 25th, with the white metal witnessing a dramatic and sharp correction. After touching multi-year highs, silver futures on the Multi Commodity Exchange (MCX) tanked, leaving investors questioning the sustainability of the bull run.
A Sharp and Sudden Downturn
On the trading floor, the numbers painted a clear picture of distress. MCX Silver September futures nosedived by a staggering 9.27%, closing at ₹91,420 per kilogram. This massive single-day fall wiped out a significant portion of the gains accumulated over the previous sessions. The trading session was volatile, with the contract hitting an intraday low of ₹90,110, indicating intense selling pressure.
The sell-off was not confined to Indian markets. Globally, the trend was mirrored, with spot silver prices on the international market crashing over 5% to trade near $30.50 per ounce. This synchronized decline pointed towards broad-based macroeconomic triggers rather than local factors alone.
What Triggered the Silver Price Crash?
Analysts and market experts point to a confluence of factors that converged to trigger the steep fall. The primary catalyst appears to be a shift in market sentiment following key economic data from the United States.
Firstly, robust US economic data released on Wednesday dampened hopes for imminent interest rate cuts by the Federal Reserve. Strong durable goods orders and a positive services PMI reading suggested the US economy remains resilient. Higher interest rates typically strengthen the US dollar and increase the opportunity cost of holding non-yielding assets like silver, making them less attractive to investors.
Secondly, profit-booking after a parabolic rally played a crucial role. Silver had enjoyed a spectacular run-up, and such sharp ascents often lead to equally sharp corrections as traders cash in on their profits. The market was considered overbought, and the correction was viewed by many as a healthy consolidation.
Thirdly, a strengthening US Dollar Index (DXY) exerted direct pressure. Since commodities like silver are priced in dollars globally, a stronger dollar makes them more expensive for holders of other currencies, potentially reducing demand.
Market Outlook and Expert Views
The sudden plunge has naturally raised concerns about whether the bullish phase for silver has concluded. Market participants are now closely watching key support and resistance levels for clues on future direction.
Technical analysts suggest that the immediate support for MCX Silver September futures is now placed around the ₹90,000 per kg level. A sustained break below this could signal further downside. On the higher side, resistance is seen near ₹94,500. Experts believe that while the short-term momentum has turned negative, the broader long-term outlook for silver remains supported by factors like industrial demand, its role as a hedge against inflation, and central bank buying of gold, which often pulls silver higher.
The consensus among commodity experts is that this is likely a correction within a larger uptrend rather than a reversal. Investors are advised to look for stability and accumulation at lower levels. The market's reaction to upcoming US economic data, particularly related to inflation and employment, will be critical in determining silver's next major move.
In summary, the silver market experienced a severe shakeout on July 25th, driven by a stronger dollar, reduced expectations for US rate cuts, and widespread profit-taking. While the rally has paused, the fundamental drivers for the white metal have not entirely vanished, setting the stage for a potentially volatile phase ahead.
