After hitting all-time highs over the past few weeks, silver prices are seeing a sharp decline. On Monday, silver prices on MCX fell nearly 6 per cent, or about Rs 17,000, during trading. On February 2, the price of silver on MCX fell to Rs 2,48,799 per kg. Earlier, MCX Silver Futures had touched the level of Rs 4 lakh to Rs 4.20 lakh per kg, but now the prices have fallen to the range of Rs 2.50 lakh to Rs 2.60 lakh per kg.
Why did silver fall so rapidly?
Regarding this sharp fall in silver prices, Ponmudi R, CEO of Enrich Money. Say this is part of a natural consolidation after a sharp rally. According to him, COMEX silver is currently trading in the important consolidation zone of $75 to $85, while earlier it had reached a record high above $121.6. He noted that silver is still broadly in an uptrend, but the recent sharp rally had pushed prices into overbought territory, leading to aggressive profit-taking and a sharp decline. Ponmudi R. It also said that prices are still above key moving averages, which suggests that the current decline is not the end of the trend, but a healthy correction.
Talking about the future outlook, Pranav Mer, Vice President, EBG – Commodity and Currency Research at JM Financial Services Ltd. said that this kind of price correction is natural after an extreme rally, and this is what has been seen in the bullion market. According to him, amid heavy selling in the domestic market on Sunday, gold has fallen by about 20 per cent from its all-time high, while silver has slipped by about 37 per cent from its peak. Global futures markets were closed on Sunday due to holidays, but on Friday, gold and silver futures prices in international markets fell more sharply than in domestic markets.
What next? Gold futures contracts for April delivery on the COMEX hit a new record high of $5,626.8 an ounce on Thursday, but then fell $612, or 11.39 percent, to close at $4,763.10 an ounce. Similarly, silver for March delivery, after hitting an all-time high of $121.78 an ounce on Thursday, fell $35.89 or 31.37 per cent to close at $78.53 an ounce on Friday.
According to market analysts, the US dollar strengthened after Federal Reserve Chairman Jerome Powell indicated that interest rate cuts were unlikely in the near future, which put pressure on gold and silver prices. Additionally, US President Donald Trump’s announcement that he will nominate former Federal Reserve Governor Kevin Worsh as the next Fed Chairman also weighed on market sentiment. Pranab Mer says that further technical correction or decline may be seen in the bullion market in the coming trading session, although after this some stability and some recovery in prices is expected.