Silver Prices Witness Extreme Downfall on MCX, Crash Over ₹1.5 Lakh from Record High
Silver prices on the Multi Commodity Exchange (MCX) have experienced a dramatic and extreme downfall over the past three trading sessions. The white metal has crashed by over ₹1,50,000 from its record high level of ₹4,20,000 per kilogram, marking one of the most significant corrections in recent commodity market history.
Special Sunday Session Sees 9% Lower Circuit Plunge
In a special trading session held on Sunday, February 1, silver prices plunged over 9%, hitting the lower circuit limit. The March contract for silver on MCX tumbled by ₹26,273 to settle at ₹2,65,652 per kilogram. This special session was conducted as Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2026-27, adding to the market's volatility and cautious sentiment.
The steep decline continued a trend that began earlier. On Friday, silver had already tumbled by ₹1,07,968, representing a 27% drop, to settle at ₹2,91,925 per kg, also touching the lower circuit. This sharp fall followed Thursday's record high of ₹4,20,048 per kg, highlighting the extreme volatility in the precious metals market.
Why Are Silver Prices Falling So Sharply?
According to market experts and analysts, the sharp drop in bullion prices is primarily due to heavy unwinding of long positions. This unwinding has occurred amid heightened global market volatility and cautious investor sentiment ahead of the Union Budget presentation. Traders and investors have been liquidating their positions to mitigate risk, leading to a cascade of selling pressure.
Despite this short-term correction, structural long-term drivers for silver remain intact. These include ongoing central bank purchases, the gradual erosion of fiat currency value, widening government fiscal deficits, and growing industrial demand from sectors such as electric vehicles (EV), artificial intelligence (AI), and renewable energy. These factors continue to support the fundamental case for silver as a strategic asset.
Industry Expectations vs. Budget Announcements
The bullion industry had high expectations from the Union Budget 2026-27. According to Prithviraj Kothari, Managing Director at RiddiSiddhi Bullions, the industry anticipated a cut in import duty on gold, GST rationalisation, export incentives, and extended credit support to boost the sector.
However, the Budget announcements fell short of these expectations. Kothari noted that while the Budget introduced a capital gains tax exemption on RBI Sovereign Gold Bonds, this exemption applies only to original subscribers and not to secondary market buyers. More importantly, there were no announcements regarding any meaningful reduction in gold import duty or comprehensive GST reforms, which left the industry somewhat disappointed.
Is This the Right Time to Buy Silver?
Market analysts offer mixed perspectives on whether the current price levels present a buying opportunity. Ponmudi R, CEO of Enrich Money, believes that MCX Silver futures have seen an extreme volatility-driven reversal after posting record highs near ₹4,20,000. This was followed by a near-vertical collapse toward ₹2,65,000, confirming what market technicians describe as blow-off top behaviour.
Ponmudi explained that this breakdown invalidates the steep bullish channel that had been in place and signals panic unwinding of leveraged long positions. Momentum indicators have flipped from extreme overbought to oversold within a very short span, highlighting structural instability rather than a healthy correction. He identified the ₹2,60,000–₹2,55,000 zone as a critical demand area; failure to hold this level may open the door to bigger corrective risks. Any pullback toward ₹3,00,000–₹3,10,000 is expected to attract selling pressure. The trend remains bearish-biased in the short term, with volatility expected to stay elevated.
On the other hand, Akshat Garg, Head of Research & Product at Choice Wealth, offered a more measured view. He emphasized that this isn't a panic moment for long-term investors. Garg stated that gold and silver should be viewed as portfolio hedges, not as trading bets. If an investor's allocation is sensible, staying put makes sense. He advised that staggered buying during corrections often works better than chasing rallies. Volatility, he noted, hurts emotions more than it damages long-term financial plans.
Disclaimer: This analysis is for educational purposes only. Investors are strongly advised to consult with a qualified investment advisor before making any investment decisions related to silver or other commodities.
