Silver prices: Jewellers' body flags ‘absurd’ MCX silver premium, seek probe into duty hike rumours

The All India Jewellers and Goldsmith Federation (AIJGF) has written to Finance Minister Nirmala Sitharaman flagging what it described as “absurd” pricing in MCX silver, after white metal prices surged to all-time high. The industry body said silver on the Multi Commodity Exchange (MCX) was trading at an extraordinary premium of around Rs 40,000 compared with prevailing benchmark or spot-linked parity, raising serious concerns about market integrity.

In its letter dated January 21, the federation said the sharp and sudden dislocation in MCX silver prices was being widely attributed in the market to rumours of a possible hike in import duty on silver, potentially in the upcoming Union Budget to be presented in Parliament on February 1. It warned that precious metals, including both gold and silver, are currently trading at abnormally high premiums over international benchmarks in India as traders across MCX and exchange-traded funds (ETFs) react to unverified policy speculation.

AIJGF warning

AIJGF warned that if rumours of an impending import duty hike are even partially true, it raises grave concerns that price-sensitive policy information may have been leaked ahead of any official announcement. “Such leakage, if it has occurred, would be a direct threat to market integrity,” the letter said, posing what it called an unavoidable question: who had advance access to this information, and who benefited from it.

The federation stressed that the price behaviour does not reflect routine volatility. It warned that premiums built on unverified policy chatter could create panic and disorderly trading, trigger forced liquidations, and lead to unfair losses for genuine hedgers, jewellers and MSMEs. It also cautioned that repeated episodes of this nature could undermine confidence in India’s commodity derivatives market and set a dangerous precedent where “policy rumours” become tools for profit extraction.

High premiums

Even market participants noted that silver premiums have spiked beyond Rs 30,000-40,000 per kg, while gold is trading at a premium of around 3–4% over global prices. This marks a sharp departure from the typically narrow spread between MCX and COMEX prices and signals heightened market anxiety around possible customs duty changes.

The surge comes amid dramatic price movements across precious metals. MCX gold February futures were trading about 5% higher at Rs 1,57,750 by 5 pm, while silver March futures jumped 3% to Rs 3,33,672. Gains were even sharper in ETFs, with Gold BeES rising 7.6%, Zerodha Gold ETF surging 9.6%, and Nippon India Silver ETF climbing 4.8%. Market participants said the abnormal premium has also created technical dislocations in arbitrage trades, disrupting normal hedging and price-alignment mechanisms.

Probe demanded 

AIJGF urged the Ministry of Finance and the Prime Minister’s Office to initiate an immediate and time-bound investigation. It sought clarity on whether any import duty change on silver is under consideration and, if so, whether information was leaked before official communication. The federation also called for scrutiny of MCX trading and position data during the run-up to the premium expansion, particularly any unusually large or concentrated positions.

Further, it asked authorities to examine potential linkages between policy information flows and market participants, including intermediaries, brokers and large traders, and to assess whether the episode resembles market manipulation through a “cornering” or “squeeze” strategy designed to engineer an artificial premium.

The speculation, market participants say, centres on whether the government might roll back its July 2024 decision to cut customs duty on gold and silver from 15% to 6%, a move originally aimed at supporting the gems and jewellery sector and curbing smuggling.

The federation said it had already cautioned the Securities and Exchange Board of India (SEBI) around 10 days earlier that silver was showing warning signs of a potential large-scale manipulation episode. It urged SEBI, MCX and other agencies to coordinate swiftly and act decisively to protect market fairness. AIJGF also offered to share ground-level market inputs and risk markers it has been tracking, should authorities require further information.