Explained: 6 reasons why silver prices crashed by Rs 21,000 per kg in 1 day
Silver prices tumbled Rs 21,000 per kg on MCX after an overheated rally unravelled, driven by easing geopolitical tensions, extreme deviation from key technical levels, and heavy profit-booking. A margin hike, record weekly gains, and a stronger dollar added to the selloff, abruptly halting silver’s meteoric year-to-date surge.
In a dramatic reversal that caught bullish traders off guard, MCX Silver March Futures plummeted 8% or Rs 21,000 per kg on Monday, crashing from an unprecedented peak of Rs 254,174/kg to Rs 233,120/kg after a non-stop rally that had propelled the white metal to never-before-seen levels.
The bloodbath followed silver's historic breach of the $80-per-ounce mark in international markets, only to tumble below $75 as profit-takers rushed for the exits and geopolitical tensions showed signs of easing. With spot silver trading around mid-$70s after touching $83.62/oz earlier in the session, the collapse has exposed the fragility of a rally that had delivered a staggering 181% year-to-date gain to outshine even gold.
1) Peace Talk Progress Kills Safe-Haven Demand
The immediate trigger for today's crash came from seemingly productive discussions between US President Donald Trump and Ukrainian President Volodymyr Zelensky regarding a potential peace deal. Trump declared on Sunday that he and Zelenskiy were "getting a lot closer, maybe very close" to an agreement to end the war in Ukraine. The easing geopolitical tensions slashed safe-haven demand across the entire bullion complex, sparking sharp profit-booking.
Also Read | Silver price crashes Rs 21,000 in an hour as overheated rally cools after breaching Rs 2.5 lakh/kg
2) 200-DMA Warning
BTIG analyst Jonathan Krinsky issued a stark warning: "Precious metals have gone parabolic. There is no other way to put it. Parabolas only end one way, with an equal and opposite downside reaction. They do not correct through time."
The technical picture is flashing red. Silver prices were trading 89% above their 200-day moving average (DMA), a level that historically precedes significant declines. "Outside of the 'Hunt Brothers' squeeze in 1979, even Silver has been 60% above its 200 DMA; it has been meaningfully lower 20, 30 and 40 days later," Krinsky noted, adding that the 174% year-to-date gain has "likely priced in much of that good news."
Manish Banthia, CIO Fixed Income at ICICI Prudential Mutual Fund, warned that "history suggests that such spectacular rises in silver rarely end gently."
"In 1979-80, silver surged from $6 to $49 an ounce before collapsing by more than 90%. In 2011, prices peaked near $48 and then fell by over 75% in subsequent years. In each case, silver had already multiplied several times before the decline began. Since the pandemic lows, prices have risen more than sixfold. Over the past year alone, they have almost tripled," he said.