Silver prices demonstrated considerable volatility on Wednesday, September 30, showing a modest recovery after a significant correction in previous trading sessions. The Multi Commodity Exchange (MCX) silver futures were trading around ₹2.26 lakh per kilogram. This movement comes as investors closely monitor global interest rate expectations and industrial demand for further market cues.
Why Silver Prices Are Under Pressure
Precious metals, including silver, are currently facing downward pressure due to a market focus on rising US Treasury yields, a stronger US dollar, and evolving interest rate expectations. Ponmudi R, Founder and CEO of Enrich Money, explained that higher yields increase the opportunity cost of holding non-interest-bearing assets like gold and silver. A stronger dollar also makes dollar-denominated commodities more expensive for international buyers.
Silver faces unique additional pressure because it serves both as an investment asset and an industrial commodity. While gold's price is predominantly influenced by safe-haven demand, central bank purchases, real yields, and the dollar's strength, silver's value is also heavily tied to manufacturing activity and industrial demand. Concerns over global economic growth, particularly manufacturing activity and demand from China across sectors like solar, electronics, and general manufacturing, can significantly impact silver prices.
Recent Market Movements
The latest market activity follows a steep sell-off in silver. On Tuesday, the MCX December silver contract traded at ₹2.25 lakh per kilogram, marking a 0.93% decrease, or approximately ₹2,064 per kilogram, from its previous close. Internationally, silver had fallen 4.6% to $61.34 per ounce on Monday, driven by the strengthening US dollar and increasing US Treasury yields.
For context, the domestic 999-fine silver rate was ₹2,26,750 per kilogram as of 10:10 AM IST on September 30, showing a 0.64% increase. Meanwhile, gold prices also saw an uptick, with 24K gold trading at ₹1,50,250 per 10 grams, up 0.93%, and MCX gold at ₹1,49,810 per 10 grams, up 0.64% around the same time.
What Should Investors Do Now?
Vikram Subburaj, CEO of Giottus.com, noted that silver had climbed above ₹2.40 lakh per kilogram earlier in the month, making the recent correction particularly significant. He advises investors to closely monitor key economic indicators such as US inflation and employment data, Treasury yields, the dollar's performance, and crude oil prices for clues on bullion's future direction.
For long-term investors, Subburaj suggests a strategy of staggered buying rather than attempting to predict the market's absolute bottom. Leveraged traders, on the other hand, are advised to reduce their exposure and implement strict stop-losses to manage risk. Satish Dondapati, Fund Manager-ETF at Kotak Mutual Fund, anticipates near-term volatility in both gold and silver but maintains a positive medium- to long-term outlook, citing global debt levels, ongoing central bank buying, and increasing portfolio allocation as supportive factors. Additionally, for Indian investors, a weaker rupee can help cushion some of the impact from falling international silver prices.