Silver prices experienced a significant correction yesterday, closing down by 11.06% at Rs 236,261, as markets responded to U.S. President Donald Trump’s intention to nominate Kevin Warsh as the next Federal Reserve chair, a decision viewed as hawkish and conducive to a stronger dollar. The decline was exacerbated by assertive profit-taking following a sustained rally that had propelled MCX silver to a historic peak close to Rs 420,000 last week.
Sentiment experienced additional pressure following the announcement from CME Group regarding increased margins on COMEX silver futures. The margins for 5,000-oz contracts are set to increase to 15% from the previous 11%, leading to a process of position unwinding. Notwithstanding the significant decline, the overarching fundamentals continue to exhibit a mixed to supportive stance. In recent weeks, silver has experienced gains due to fiscal concerns, ongoing ETF inflows, and supply-side risks associated with China’s stricter export licensing regulations. Chinese silver inventories have declined to their lowest levels in a decade, driven by substantial exports, while stocks at the Shanghai Futures Exchange have reached multi-year lows.
Concurrently, silver holdings in London vaults increased by 2.3% month-on-month, reaching 27,818 tonnes by the conclusion of December. Citi maintains a positive outlook, increasing its short-term silver forecast to $150 per ounce. Further structural support arises from the U.S. initiative to establish a $12 billion critical minerals reserve, alongside an increasing emphasis on silver as a strategic metal.
From a technical perspective, the market is experiencing long liquidation, evidenced by a decline in open interest of 11.99% to 6,704, coinciding with a significant price decrease of Rs 29,391. Support is identified at Rs 218,880; a breach of this level would lead to a potential decline towards Rs 201,495. Conversely, resistance is positioned at Rs 260,575, with an upward movement likely to challenge Rs 284,885.