The Silver Sell-Off
Silver prices on the Multi-Commodity Exchange (MCX) experienced a sharp downturn on Thursday, February 5, 2026, shedding 9% in early trading to approximately ₹2,44,654 per kilogram. This decline mirrors a significant collapse in global spot prices, which fell over 13% from earlier intraday highs near $90 an ounce, dropping below $75. The swift depreciation erased recent gains, wiping out two days of recovery in mere minutes and underscoring extreme market sensitivity.
ETF Carnage and Leverage Risk
The brutal sell-off translated directly into substantial losses for Silver Exchange Traded Funds (ETFs) in India, with funds reporting declines between 13% and 20%. This severe impact is compounded by the significant leverage held within these vehicles. As of February 4, the Nippon AMC Silver ETF, for instance, maintained leveraged positions exceeding ₹1,300 crore, with some reports indicating net positions of nearly ₹1,750 crore by late January. Such high leverage amplifies both gains and losses, turning sharp price drops into significant portfolio damage for investors.
Historical Context and Market Drivers
This violent swing occurs after silver reached record highs in January 2026, with spot prices touching $121.64 per ounce. The subsequent volatility has been historic, with a single-day drop of over 37% recorded on January 30, 2026, and a cumulative fall of 41% in three days. The immediate catalyst for this latest downturn appears to be the nomination of Kevin Warsh as the next Federal Reserve Chair, perceived as a hawkish signal that strengthens the US dollar and dampens appetite for non-yielding assets like silver. This macro shift overrides recent geopolitical tensions that had previously supported precious metals.
Comparative Performance and Outlook
While silver experienced a precipitous decline, gold ETFs saw less severe losses of 4% to 6% on February 5. Gold futures on MCX showed resilience, trading higher by approximately 1.58%. Analysts point to the inherent rigidity of silver supply, often a byproduct of other mining operations, as a factor in its amplified price movements. Despite current volatility, longer-term outlooks remain cautiously optimistic. Forecasts for 2026 suggest silver could average between $56 and $65 per ounce, with some analysts predicting targets as high as $100-$170, driven by strong industrial demand from sectors like AI and renewable energy. However, the market is currently grappling with speculative positioning and the unwinding of stretched long trades. The recent plunge also exposes potential opportunities in silver mining stocks, which some experts suggest may lag the physical metal's price performance and offer a catch-up trade.
Analyst Sentiment and Forward View
Nippon India Silver ETF's price targets for 2026 range from ₹300-350 in a conservative scenario to ₹450-500 in a bullish case. While near-term volatility is expected to persist, this event is viewed by some as a "positioning-driven reset" rather than a fundamental turning point. The market will closely monitor the interplay between speculative capital, macroeconomic shifts, and underlying industrial demand to gauge silver's trajectory.