MCX silver futures climb 4% after Monday's selloff; what's next?

Silver futures for March delivery climbed over 4 per cent in Tuesday's trade, a day after selloff. On MCX, the bullion futures were trading Rs 9,514, or 4.24 per cent, higher at Rs 2,33,999 per kg, after hitting a low of Rs 2,31,100 and a high of Rs 2,36,907. This is a day after MCX Silver March futures fell Rs 21,511 per kg intraday, after hitting a fresh all-time high of Rs 2,54,174 per kg earlier in the day. International spot silver prices too had retreated from record high of $83.70 yesterday on profit booking and easing geopolitical risk. Prices lost almost 9 per cent on Monday after rallying nearly 36 per cent in this month, ICICI Direct noted.

Ponmudi R, CEO of Enrich Money said silver's sharp single-session correction on Monday was driven largely by profit booking rather than any breakdown in the underlying trend.

"The trigger was structural in nature: CME margin hikes and position-limit reductions announced on December 26 led to margin calls and rapid unwinding of over-leveraged speculative positions. This move was further amplified by thin year-end liquidity and broad-based profit-taking following recent record highs," he said.

Ponmudi  said it is also important to note that during the 2015, 2019 and 2020 periods, silver’s domestic base price zone was near Rs 33,000 per kg. "Today, silver is operating in a markedly different market regime, characterised by deep global participation via ETFs, derivatives, algorithmic trading, and instant market access, which naturally results in higher day-to-day volatility," he said.

Rahul Kalantri, VP for Commodities, at Mehta Equities Ltd said the recent pullback was largely technical, driven by stretched long positions and a hike in margin requirements by the CME, prompting leveraged players to cut exposure.

He said thin holiday trading conditions further amplified intraday swings, dragging prices away from recent peaks. However, safe-haven demand stemming from US–Venezuela tensions and renewed Russia–Ukraine hostilities could lend support at lower levels, Kalantri said.

"We continue to maintain a buy-on-dips stance with a staggered approach for investment in silver, in light of the factors discussed above. The initial target of $75 on COMEX has been achieved; we remain committed to the previously stated target of $77 on COMEX which is Rs 2,46,000 on domestic front. Any further revisions to levels will be guided by evolving market conditions and will be communicated in reports to follow," MOFSL said on Monday.

This domestic brokerage noted that joint pressures from physical scarcity, institutional inventory concentration and policy-driven supply restrictions are forcing a re-evaluation of how silver prices are discovered in 2025.

"Paper markets such as COMEX and LBMA, long dominant as liquidity hubs, are increasingly struggling to reflect true physical tightness, while Asian physical centres, especially Shanghai, are setting the price where metal is actually consumed and stockpiled. Persistent premium between Shanghai spot and COMEX futures is therefore not noise, but a structural signal, reinforced by falling visible inventories globally and elevated lease rates as traders compete for deliverable metal," MOFSL said.

With 2025 marking fifth straight year of physical deficit and mine supply still unable to match industrial and investment demand, MOFSL said silver buyers are shifting toward physical accumulation outside registered systems, allowing physical price signals to outweigh paper dynamics.