Silver Prices Plummet Below Pre-Customs Duty Hike Levels, Falling Rs 17,500 in a Single Day Due to Increased Supply, Weak Demand, and Global Market Trends.
In the latest trade session, silver prices experienced a startling decline, plummeting by approximately 6% or Rs 17,500 on the Multi Commodity Exchange (MCX), returning to levels not seen since the Indian government increased import duties from 6% to 15%. This increase was implemented to stabilize the Indian rupee against rapidly falling values. Following the duty hike, silver futures initially surged to around Rs 3 lakh per kg but have since retraced those gains entirely, highlighting the market’s sensitivity to shifts in demand and broader economic indicators. This steep correction can primarily be attributed to dwindling demand at elevated price levels, particularly given silver’s substantial industrial applications across various sectors, such as renewable energy and technology.
Geopolitical tensions, particularly surrounding the Iran conflict, initially spurred safe-haven buying in precious metals; however, this demand has dissipated as market participants recalibrate their focus on the broader implications of sustained high oil prices on global growth. The elevated cost of silver due to the import duty may additionally hinder domestic demand, particularly in jewelry and industrial applications, as outlined by Nirpendra Yadav, Senior Commodity Analyst at Bonanza. The hawkish stance adopted by central banks in response to inflationary pressures also plays a critical role in diminishing the allure of non-yielding assets like silver, thereby exerting further downward pressure on prices.
Going forward, the technical indicators suggest that silver may be entering a volatile period characterized by profit-booking and potential consolidation after the recent spike in prices. Current trends indicate that the market is correcting toward key supportive levels, and previous experiences serve as a reminder that temporary price distortions from duty changes do not substantially alter the underpinnings of global market dynamics. While silver continues to show promise with strong structural support linked to industrial demand in technology and renewable energy sectors, reports from Tata Mutual Fund indicate that the deteriorating global economic outlook could limit medium-term demand. Investors are advised to adopt a staggered approach to accumulation, given the market’s inherent volatility and the ongoing fluctuations in demand and supply dynamics.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)