Silver Price SHOCK: India Sees Steep Fall Below Rs 1.8 Lakh! Expert Warns of Volatility, But $60 Rally Possible?

Silver prices saw a notable decline on December 5, impacting both international and Indian markets. The spot silver price dipped approximately 3.46 percent to $56.90 per ounce as of early morning trade.

In India, silver futures for December delivery closed the Thursday session on MCX at Rs 1,77,951 per kilogram for 999 purity, marking a drop of about 2.41 percent from the previous day's close. The Indian Bullion and Jewellers Association (IBJA) also reported prices for 999 purity silver at Rs 1,76,625 per kilogram on December 4.

Factors Driving the Price Drop

Several factors contributed to the downward pressure on silver prices:

• Profit Booking: Traders likely engaged in profit-taking after recent gains, leading to increased selling.
• US Federal Reserve Hopes: Anticipation of potential interest rate cuts by the US Federal Reserve in the coming week can sometimes lead to shifts in commodity investment.
• Supply Dynamics: While the underlying supply deficit remains a key factor, short-term market movements can be influenced by these other pressures.

Year-to-Date Performance and Underlying Strength

Despite the recent dip, silver has demonstrated remarkable strength throughout the year. An Augmont Bullion report highlighted that silver has risen approximately 100 percent this year. This substantial increase was driven by several factors:

• Market Liquidity Concerns: Outflows into US and Chinese inventories.
• Vital Minerals List Inclusion: Silver's inclusion on the US vital minerals list.
• Structural Supply Deficit: A persistent imbalance between silver supply and demand.

Expert Outlook

Analysts remain cautiously optimistic about silver's medium-term prospects, provided supply conditions remain tight. Rahul Gupta, Chief Business Officer at Ashika Group, commented on the outlook for MCX Silver:

• Immediate support for MCX Silver is observed around Rs 1,76,200.
• Resistance is placed near Rs 1,83,000.
• A sustained breakout above the Rs 1,83,000 resistance zone could pave the way for a renewed upswing.

Gupta noted that silver is currently easing due to profit booking, but its fundamental structure remains intact. If tight supply conditions persist, silver could see support at $57 (approximately Rs 1,77,000) and potentially rally towards $60 (around Rs 185,500) and $62 (approximately Rs 191,000).

Importance of the Event

This price movement is significant as silver is a key industrial metal and a precious store of value. Fluctuations impact industries reliant on silver, such as electronics, solar energy, and jewelry manufacturing. For investors, it represents potential opportunities and risks in the commodity market.

Impact

The recent dip in silver prices could provide a temporary reprieve from rising commodity costs for industrial users. Investors may see short-term trading opportunities. However, the underlying demand and supply factors suggest potential for price recovery. The overall impact on the Indian market includes effects on inflation, the jewelry sector, and investment portfolios.

• Impact Rating: 7/10

Difficult Terms Explained

• Spot Price: The price for immediate delivery of a commodity.
• Futures: A contract to buy or sell a commodity at a specified price on a future date.
• Purity (999): Indicates that the silver is 99.9% pure.
• IBJA (Indian Bullion and Jewellers Association): An industry body that provides benchmarks for gold and silver prices in India.
• MCX (Multi Commodity Exchange): A commodity derivatives exchange in India where futures contracts are traded.
• US Federal Reserve: The central banking system of the United States.
• Rate Cuts: A reduction in the target interest rate by a central bank.
• Profit Booking: Selling an asset to realize profits after its price has increased.
• Structural Supply Deficit: A long-term imbalance where the demand for a commodity consistently exceeds its available supply.
• Liquidity: The ease with which an asset can be converted into cash without affecting its market price.