What stands out is the sheer speed and severity of the decline. Silver futures for May have plunged 51% from their record high of Rs 4.39 lakh per kilogram to below the Rs 2.15 lakh mark in just two months. In absolute terms, that translates into a staggering erosion of Rs 2,23,924, underscoring the intensity of the selloff.
There are three broad reasons for the dramatic fall. First, a stronger US dollar and hawkish Federal Reserve stance have reduced the appeal of non-yielding assets like silver. The US Dollar Index (DXY) has climbed sharply from around 97 in mid-February to 100.15 by mid-March, highlighting strong safe-haven inflows into the greenback. Since silver is priced in dollars, a stronger currency makes the metal more expensive for holders of other currencies, reducing both investment and physical demand.
Second, profit-booking after an overstretched rally has accelerated the downside. As volatility spiked with the escalation in the Middle East conflict, traders chose to lock in profits rather than chase the rally, triggering a wave of selling instead of the usual safe-haven buying. This kind of reaction is typical after extended up moves, where preserving gains takes priority over new bets. As a result, profit booking has significantly capped the upside that geopolitical tensions would otherwise have provided.
Third, industrial demand expectations have softened amid global growth concerns, particularly from China and Europe. China is among the world’s biggest consumers of silver, driven largely by its manufacturing base. Silver is heavily used in electronics, solar panels, batteries and electrical equipment, all of which China produces at scale. Weak industrial activity in China typically dents silver demand.
Right time to buy?
“We reiterate investing in silver over supportive fundamentals and market uncertainties. Any decline in prices over dollar rally or ease in tensions provides opportunity to accumulate or invest in silver,” Tata Mutual Fund said in a report.
Corrections after a sharp, extended rally are natural and do not undermine the long-term bullish outlook for precious metals. In the case of silver, the structural fundamentals remain firmly in place despite the recent pullback, the report added.
A key driver is the strong and growing industrial demand, which accounts for over 60% of total silver consumption. Rising usage across sectors, along with steady investment demand from China, is expected to keep prices supported at elevated levels over the medium to long term. At the same time, the supply side continues to tighten. Silver has been in a supply deficit for five consecutive years and has now entered its sixth year of structural shortfall. Export restrictions and declining inventories on the Shanghai Futures Exchange, which are currently near decade lows, highlight the strain on physical availability.
This persistent imbalance between demand and supply is a significant positive for market sentiment and continues to reinforce a constructive outlook for silver prices.
Ponmudi R, CEO of Enrich Money echoes the view and suggests that despite geopolitical tensions and elevated crude prices, silver remains more industrial than defensive. Investors should avoid aggressive entry and instead follow a staggered accumulation approach near strong support zones with a medium- to long-term view.
Technicals flash caution!
On the MCX, Rs 2,00,000 remains the crucial support zone. Ponmudi R suggests that the white metal is currently trading within the Rs 2,12,000-Rs 2,14,000 support zone, indicating continued selling pressure at higher levels. On the upside, Rs 2,18,000–Rs 2,20,000 remains the immediate resistance. A breakout above Rs 2,20,000 could lead to a recovery toward Rs 2,24,000. Overall, the bias remains negative amid ongoing macro and geopolitical uncertainty.
Manoj Kumar Jain of Prithvi Finmart said that silver is witnessing heightened price volatility, with white metal likely to face strong resistance near $80 per troy ounce. He expects continued choppiness, driven by fluctuations in the dollar index, crude oil prices and ongoing US-Iran tensions.
Silver on the MCX has support at Rs 2,17,700–Rs 2,10,000 and resistance at Rs 2,31,100-Rs 2,36,500. Jain advised investors to wait for some stability before taking fresh positions in gold and silver, while suggesting that small investors continue with SIP investments amid the current market volatility.
Ponmudi added that the $54 level for Comex silver is critical. This zone previously acted as a strong resistance and later as a swing high, and is now expected to behave as a key support area. Holding above this level could stabilize prices and trigger a base formation, while a decisive break below may open further downside.
In today’s session, MCX silver futures due May 2026 were down Rs 9,753 or 4.3% to Rs 2,15,414 per kg as a stronger U.S. dollar and fading expectations of near-term Federal Reserve rate cuts dampened sentiment.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)