The remarkable ascent of silver prices, which saw a significant surge of over 19% and even exceeding 22% in January 2025 according to MCX data, experienced an unexpected halt on Friday, while despite strong momentum that had fueled expectations of silver touching the 3 lakh rupee level, the precious metal witnessed a notable decline of over 1. 25% in the country's futures market. This sudden reversal has left investors and market analysts pondering the underlying causes and the future. Trajectory of silver, especially whether it will breach the psychological 3 lakh mark in the coming week.
Key Factors Behind the Decline
On Friday, the Multi Commodity Exchange (MCX), India's premier commodity derivatives exchange, recorded a significant drop in silver prices. The white metal closed at 2,87,762 rupees per kilogram, marking a substantial fall of 3,815 rupees. During the trading session, silver even touched a day's low of 2,84,045 rupees. This performance stood in stark contrast to the previous day's closing price of 2,91,577 rupees and the widespread anticipation that prices would reach the 3 lakh level. Notably, this decline on Friday broke a streak of five consecutive positive trading sessions for silver in the futures market, indicating a shift in market sentiment and prompting questions about its immediate future.
Market experts have identified five primary reasons contributing to the sudden deceleration in silver's rally. These factors, ranging from geopolitical developments to domestic market dynamics, collectively influenced investor behavior and led to the observed price correction. Understanding these elements is crucial for anticipating future movements in the silver market.
Easing US-Iran Tensions:
A significant factor has been the perceived reduction in tensions between the United States and Iran. Reports suggesting that the US administration isn't planning an attack on Iran, coupled with recent positive remarks from former President Trump regarding Iran's decision not to execute prisoners of war, have shifted investor sentiment away from safe-haven assets like silver, while geopolitical stability typically reduces the demand for precious metals as a hedge against global uncertainty. While the situation remains uncertain and volatile, the immediate de-escalation has prompted. Some investors to re-evaluate their positions, reducing the demand for precious metals.
Reduced Fed Chairman-Trump Friction:
Another contributing element is the apparent easing of the long-standing tension between the US Federal Reserve Chairman Jerome Powell and former President Trump. Trump's recent statements, explicitly denying any intention to prosecute or imprison. Powell, have brought a sense of relief to the bullion market. This perceived reduction in political pressure on the Fed, combined with global central banks rallying in support of Powell, has led Trump to adopt a softer stance, thereby reducing market uncertainty and the appeal of safe-haven investments, while greater political and economic stability often diverts funds from precious metals to riskier, higher-yielding assets.
Improved US Employment Figures:
The latest employment data from the United States also played a role, while while job creation in December saw a slowdown, with only 50,000 non-agricultural jobs added compared to 56,000 in November, the national unemployment rate unexpectedly dropped to 4. 4%, while this decline, as reported by the Bureau of Labor Statistics, signals a resilient labor market despite some layoffs in key sectors. Stronger economic indicators typically reduce the demand for safe-haven assets, as investors become. More confident in riskier investments, contributing to the downward pressure on silver prices.
Surge in Dollar Index:
Concurrently with the improved unemployment rate, the Dollar Index experienced a significant surge, while the index reached a six-week high of 99. 838, marking an increase of over 1% within the current month. A stronger US dollar makes dollar-denominated commodities like silver more expensive for holders of other currencies, thereby dampening demand and exerting downward pressure on prices. This inverse relationship between the dollar and precious metals is a classic. Market dynamic that was clearly at play on Friday, affecting international purchasing power.
Profit-Booking Activities:
Finally, a substantial amount of profit-booking contributed to the decline. After silver prices touched a lifetime high on Thursday, many investors opted to cash in on their gains. On MCX, silver prices initially plummeted by over 7,500 rupees, reaching as low as 2. 84 lakh rupees, before a slight recovery. This natural market correction, following a period of rapid appreciation, is a common occurrence as investors lock in. Profits, especially when other market indicators suggest a potential slowdown in the rally or a shift in sentiment.
**Will Silver Cross the 3 Lakh Mark?
The most pressing question for investors now is whether silver prices will indeed breach the 3 lakh rupee level in the coming days. According to Anuj Gupta, Director of Y Wealth, it seems challenging for the March contract of silver to reach 3 lakh rupees next week, especially given the easing geopolitical tensions and the strengthening dollar. He anticipates the March contract to trade between 2. 90 lakh and 2. 95 lakh rupees. However, the outlook for the May contract is more optimistic, with predictions that it could touch the 3 lakh rupee mark, while on Friday, the May contract for silver had already reached a lifetime high of 2,99,993 rupees before falling by 4,569 rupees to close at 2,95,424 rupees, indicating its proximity to the coveted milestone. The continuous depreciation of the Rupee against the dollar is also expected to support local gold and silver prices, potentially aiding the upward movement in the long run.
January's Remarkable Rally in Futures Market
Despite Friday's dip, the overall performance of silver in the futures market during January 2025 has been nothing short of spectacular. On December 31, 2024, silver prices stood at 2,41,048 rupees. By Friday's close, they had surged to 2,87,762 rupees, representing an increase of 46,714 rupees. This translates to a gain of over 19% in January alone, underscoring the solid momentum silver has maintained since the beginning of the year, while in the Delhi bullion market, silver prices recorded a sixth consecutive day of record gains on Friday, jumping 3,600 rupees to 2,92,600 rupees per kilogram, after closing at 2,89,000 rupees on Thursday. This market has seen an astonishing 20. 16% (49,100 rupees) rise in just six sessions since January 8, when prices were 2,43,500 rupees. Silver has outperformed gold for the second consecutive year, delivering a 22, while 4% gain so far, highlighting its strong market appeal.
Global Market Performance
The trend of declining silver prices wasn't confined to the Indian market but was also reflected globally. In New York's COMEX market, silver futures closed down by 4. 13%, or $3. 81 per ounce, settling at $88. 54 per ounce on Friday. Gold spot prices also experienced a fall, closing down by 2, while 49% at $90. 1257 per ounce. European markets saw silver prices decline by 2. 63%, closing at $77, while 7345 per ounce, while in the British market, silver recorded a 2. 48% drop, settling at $67, while 35 per ounce. This synchronized global downturn suggests that the factors influencing silver prices on Friday were broad-based and not limited to regional market dynamics, indicating a wider shift in investor sentiment across international commodity markets.
