The Indian commodity market has witnessed a historic correction in precious metal prices following the presentation of the Union Budget 2025. On February 2, gold and silver prices continued their downward trajectory for the third consecutive session. 41 lakh per kg. 40 lakh per 10 grams. According to market analysts, this sharp decline is primarily driven by large-scale profit booking at record highs and a significant hike in margin requirements by global exchanges.
Sharp Correction in Futures and Bullion Markets
The decline wasn't limited to the futures market; the physical bullion market also recorded substantial price cuts. According to data from the India Bullion and Jewelers Association (IBJA), silver prices in the bullion market fell by ₹29,255 to settle at ₹2,36,496 per kg. Meanwhile, 24-carat pure gold prices dropped by ₹6,427 to reach ₹1,42,270 per 10 grams. Over the last three days, gold prices on MCX have corrected by a total of ₹30,000.40 lakh mark. 01 lakh per kg.
Key Drivers: Profit Booking and Reduced Physical Demand
Market experts attribute this massive correction to two primary factors, while the first is 'profit booking' by investors. After gold and silver reached unprecedented levels in recent weeks, investors chose to liquidate their positions to realize gains. The second factor is the weakening of physical demand in the domestic market, while as prices hit all-time highs, retail demand for jewelry saw a significant slowdown. Plus, concerns regarding the industrial consumption of silver amid global economic uncertainties have added further downward pressure on the white metal.
Impact of CME Margin Adjustments on Trading
According to SEBI-registered commodity experts, the decision by the Chicago Mercantile Exchange (CME) to increase margin money has played a pivotal role in the price crash. The CME raised the margin for gold from 6% to 8% and for silver from 11% to 15%. In commodity trading, margin is the security deposit required by traders to maintain their positions. An increase in margin means traders must deploy more capital for the same volume of trade. This forced many traders with insufficient liquidity to sell their holdings, triggering a wave of selling pressure that accelerated the price decline.
Guidelines for Consumers and Purity Verification
Amid the price volatility, experts have emphasized the importance of verifying purity during purchases. Consumers are advised to buy only Bureau of Indian Standards (BIS) hallmarked gold. , AZ4524) that confirms the caratage and authenticity of the metal. Also, buyers should cross-check daily rates from reliable sources like the IBJA website. For silver, several physical tests can be performed: the Magnet Test (genuine silver is non-magnetic), the Ice Test (ice melts rapidly on real silver), and the Cloth Test (rubbing silver on a white cloth should leave a black mark if it's authentic).
Market Analysis and Technical Outlook
Analysts suggest that the market is currently undergoing a necessary technical correction after an extended rally. The combination of higher margin requirements and shifting global economic sentiment is expected to keep prices volatile in the near term. Experts believe that price stability will depend on how liquidity levels adjust to the new margin structures. While long-term factors such as central bank gold purchases and industrial demand remain relevant, the immediate focus of the market remains on technical support levels and global macroeconomic data releases.