Silver price volatility: MCX silver falls after sharp correction; what should investors do now?

Silver prices remained volatile on Wednesday, September 30, with the precious metal recovering modestly after a sharp correction over the previous sessions. MCX silver futures were trading around ₹2.26 lakh per kg, while the domestic 999-fine silver rate was ₹2,26,750 per kg as of 10:10 AM IST, according to Bullions.co.in.

The latest movement follows a steep sell-off in silver. On Tuesday, the MCX December silver contract traded at ₹2.25 lakh per kg, down 0.93%, or about ₹2,064 per kg from the previous close of ₹2.27 lakh. International silver had fallen 4.6% to $61.34 per ounce on Monday as a stronger US dollar and rising US Treasury yields pressured precious metals.

Why is silver under pressure?

Ponmudi R, Founder and CEO, Enrich Money, said gold and silver are facing pressure as markets focus more on yields, the dollar and interest-rate expectations despite ongoing geopolitical tensions.

“Higher yields increase the opportunity cost of holding gold and silver, which do not generate interest income,” Ponmudi said. A stronger US dollar also makes precious metals more expensive for buyers using other currencies.

Silver is facing an additional pressure because it has both investment and industrial uses. While gold is primarily influenced by safe-haven demand, central-bank buying, real yields and the dollar, silver is also linked to manufacturing activity and industrial demand.

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Concerns around global growth, manufacturing activity and demand from China can therefore weigh on silver, including demand from solar, electronics and manufacturing sectors.

Silver and gold prices: Key rates

What about gold prices?

Gold also remained higher on September 30. Bullions.co.in put the 24K gold rate at ₹15,025 per gram, or ₹1,50,250 per 10 grams, at 10:10 AM IST, up ₹1,390, or 0.93%.

On MCX, gold was trading 0.64% higher at ₹1,49,810 per 10 grams around the time cited. The 22K gold rate was ₹13,773 per gram.

These are indicative rates and the final retail price can vary after GST, dealer premiums and making charges.

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What should silver investors do now?

Vikram Subburaj, CEO, Giottus.com, said silver had climbed above ₹2.40 lakh per kg earlier this month, making the recent correction significant.

He said investors should watch US inflation and employment data, Treasury yields, the dollar and crude oil prices for the next direction of bullion prices. For long-term investors, Subburaj suggested considering staggered buying rather than attempting to time the market bottom.

For leveraged traders, he advised reducing exposure and using strict stop-losses.

Satish Dondapati, Fund Manager-ETF, Kotak Mutual Fund, expects near-term volatility in gold and silver but remains positive on the medium- to long-term outlook, citing global debt, central-bank buying and increasing portfolio allocation as supportive factors.

For Indian investors, the rupee is another variable, as a weaker rupee can cushion some of the impact of falling international silver prices.

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