The global silver market experienced one of its most turbulent trading days in recent memory on Monday, with prices oscillating wildly in a session marked by extreme volatility. The ripple effects of this global turmoil were distinctly felt in Indian commodity markets as well.
Record Highs and Sharp Corrections
In international markets, the price of silver surged close to a milestone of $84 per ounce. Mirroring this rally, silver futures on the Multi Commodity Exchange (MCX) in India scaled a fresh all-time peak above Rs 2.5 lakh per kilogram. However, the jubilation was short-lived. The white metal could not hold these lofty levels and witnessed a steep intraday fall. On the MCX, futures contracts plummeted by over Rs 22,000, marking a decline of approximately 10%, to settle around the Rs 2.3 lakh per kg mark.
Key Drivers Behind the Silver Rollercoaster
Analysts and traders pointed to a confluence of factors that triggered this sharp price movement. A significant trigger was a 25% hike in margins on silver futures contracts announced by the Chicago Mercantile Exchange (CME). Higher margin requirements increase the cost of holding positions, often prompting leveraged traders to exit.
Furthermore, market participants engaged in heavy profit-booking after a spectacular rally that saw silver gain over 25% in just one month. Geopolitical developments also played a role, as renewed hopes for a peace deal between Russia and Ukraine softened safe-haven demand for precious metals. The situation was exacerbated by typically thin trading volumes due to the holiday season in many parts of the world.
Structural Support for the Long-Term Rally
Despite the day's sharp pullback, the fundamental backdrop for silver remains strong, according to experts. Kaynat Chainwala of Kotak Securities explained that the metal's unprecedented surge this year is rooted in structural tightness. This is supported by multi-year supply deficits, persistent physical shortages, and robust industrial demand, especially from sectors like solar energy and electric vehicles.
"Favourable macro conditions, including the anticipation of US rate cuts, have further underpinned the rally," Chainwala noted. Commenting on Monday's volatility, she added, "Prices pulled back sharply to $74 an ounce after hitting a fresh record near $84, largely reflecting profit-taking and higher CME margin requirements, which can prompt leveraged participants to reduce exposure."
The dramatic session underscores the highly sensitive nature of the silver market to both macroeconomic cues and technical trading factors, leaving investors bracing for more potential swings in the near term.
