After weeks of a relentless rally, silver prices finally lost steam, witnessing a sharp pullback on Friday, October 17. On the Multi Commodity Exchange (MCX), silver futures plunged nearly 10% from a lifetime high of Rs 1,70,415 per kg to an intraday low of Rs 1,53,700, before recovering slightly to close at Rs 1,57,300. Globally, the metal slipped 6%, from $54 to $51.5 per ounce, halting what had been its strongest rally in more than a decade.
The sudden fall followed signs of easing U.S.-China trade tensions, which reduced safe-haven demand and triggered profit-booking among traders. On Monday, October 20, silver steadied at around ₹1,56,755 per kg (approximately $52 per ounce), still down about 8% from its record high. Despite the correction, the broader market tone remains upbeat, with analysts pointing to deep structural supply constraints and continued industrial demand as key long-term drivers.
Festive demand triggers global supply shock
The pullback came on the heels of a severe supply squeeze that rattled the global silver market in the run-up to India’s festive season. In the weeks preceding Dhanteras and Diwali, Indian investors — traditionally heavy gold buyers — pivoted sharply toward silver, triggering unprecedented retail and institutional demand.
Dealers across major cities, including Mumbai and Ahmedabad, reported being completely sold out, while refiners and logistics networks struggled to restock. The surge in buying sent premiums — the extra cost over international benchmark prices — soaring past $5 per ounce, their highest in decades.
This sudden strain disrupted normal market functioning across trading hubs from Mumbai to London and New York. In London, bid-ask spreads widened dramatically as bullion banks pulled back from quoting prices. Refiners and funds also imposed restrictions on new orders, citing a lack of available metal and rising transport bottlenecks.
Structural mismatch drives volatility
The volatility in silver prices reflects a widening gap between demand and available supply. The white metal’s dual role — as both an investment asset and an industrial input — has intensified pressure on inventories. Consumption in sectors such as solar, electric vehicles, and electronics remains robust, while investors continue to treat silver as a hedge against inflation and currency weakness.
Global inventories have fallen sharply. London’s “free float” stock, not already owned by exchange-traded funds, reportedly hit its lowest level in years, while COMEX warehouse inventories in New York saw one of their steepest drawdowns in over two decades.
Indian funds and traders hit pause
The crisis also rippled through India’s financial markets. Several mutual funds temporarily halted new subscriptions to their silver ETFs and fund-of-funds due to sourcing challenges. Traders reported erratic arbitrage gaps between global and domestic exchanges, a sign of market dislocation and thin liquidity.
What lies ahead
While the near-term correction has cooled prices, the underlying fundamentals remain bullish. Industrial use continues to rise faster than new supply, and the festive buying cycle is expected to keep inventories tight through the year-end.
Market participants believe that once temporary bottlenecks ease, silver could resume its long-term uptrend. For now, India’s festive frenzy — which drained global stocks and sent premiums to record highs — has also brought a timely reminder of just how volatile and globally intertwined the silver market has become.
