Silver's Biggest Correction Since Inception: Expert Explains Why Futures Plunged 10%
The pullback in precious metals was attributed to several factors that calmed market anxieties.
Silver prices on the Multi Commodity Exchange saw the biggest correction since the metal’s inception, falling by 16,715 points from the day’s high to the day’s low on Oct. 17. This historic volatility saw silver futures plunge nearly 10% from their peak before managing to settle with modest gains.
The white metal had surged to a record Rs 1,70,415 per kg earlier in the session on the MCX. However, as global safe-haven demand eased, it slipped sharply to hit an intraday low of Rs 1,53,700, as per data shared by Anuj Gupta, Director of YA Wealth Global. Despite the massive intra-day swing, it pulled a partial recovery in the final hour of trade to close at Rs 1,57,300, up 0.44% from the previous day's close.
Why Silver Futures Plunged
The dramatic drop in Indian futures followed a severe slump in global prices, where US spot silver fell as much as 6% on Friday, marking its largest single-day decline in six months.
Globally, silver recovered slightly to close down 4.75%, after peaking at $54.63 and settling at $51.86 an ounce. According to Anuj Gupta, the magnitude of the correction, a drop of 16,715 points, is unprecedented. "The biggest correction in silver by 16,715 points from day’s high to day’s low in silver since inception," stated Gupta.
The pullback in precious metals was attributed to several factors that calmed market anxieties, which in turn reduced the appeal of safe-haven assets.
Gupta cites concerns over US credit quality and China-US trade tensions easing following the comments from President Donald Trump, as a factor that helped stabilise global trade worries.
"Positive results from regional banks helped stabilise the stock market and pushed bond yields higher. The resulting rise in interest rates typically pressures gold and silver prices, as these metals are non-yielding assets," he said. Further, the signs of easing in the historic silver squeeze in the London market led to widespread profit-taking among investors, he added.
Zooming out, the decline was not limited to silver, as gold also pulled back from its recent rally. US spot gold was down 3% at $4,186.4 an ounce. On the MCX, the yellow metal’s futures dropped nearly 5% from its day's high of Rs 1,32,294 per 10 grams to an intraday low of Rs 1,25,957, though it ended the session with minor 0.25% gains.
