Silver Prices Crash 25% on MCX, Wiping Out ₹1 Lakh/kg

A Dramatic Reversal in Precious Metals

Silver prices on the Multi Commodity Exchange (MCX) experienced a dramatic and historic crash on Friday, January 29, 2026, ending a record-breaking rally. March silver futures plummeted by nearly 25%, one of the steepest single-day declines in recent history. The contract closed at approximately Rs 3,42,390 per kilogram, a staggering drop from the previous day's close of Rs 4,54,000. The fall effectively wiped out close to Rs 1 lakh per kilogram in value, shocking investors who had witnessed the metal soar to unprecedented highs earlier in the week.

This severe correction was not isolated to the Indian market. It mirrored a global sell-off in precious and industrial metals. In international markets, spot silver tumbled around 28% to $15 per troy ounce, retreating sharply from its recent all-time high of $121.60. The broad-based decline signaled a significant shift in market sentiment after a period of intense bullishness.

The Scale of the Global Sell-Off

The rout extended across the commodities complex. Gold, which often moves in tandem with silver, also saw a significant drop. In New York, gold futures fell 8.9% to $1,894.23 an ounce. On the MCX, gold futures for February delivery fell by as much as 11%, or Rs 19,000, to close around Rs 1,50,440 per 10 grams. Other precious metals like platinum and palladium also slumped. The weakness was also visible in industrial metals, with copper on the London Metal Exchange (LME) falling 3.4% to $13,157.50 a ton after hitting a record high just a day earlier.

Catalyst 1: Aggressive Profit-Taking

Analysts unanimously pointed to widespread profit-taking as the primary driver behind the crash. The sell-off came after an extraordinary rally in January, which saw silver prices gain 19% and gold rise 13% for the month. Looking back over the past year, silver had delivered a stunning 170% return, climbing from around Rs 1.6 lakh per kg in early 2025 to over Rs 4 lakh in January 2026. Such a parabolic move made the market susceptible to a sharp correction as traders rushed to lock in their substantial gains.

Catalyst 2: A Resurgent US Dollar

A significant trigger for the sell-off was a rebound in the U.S. dollar. The currency strengthened following news that President Donald Trump had nominated former Fed Governor Kevin Warsh as the next Federal Reserve Chair. Investors interpreted this appointment as a signal of a potentially more hawkish central bank, which could lead to tighter monetary policy. A stronger dollar makes commodities priced in dollars, such as gold and silver, more expensive for holders of other currencies, thereby reducing their appeal and demand.

Technical Factors and Regulatory Action

Technical indicators also signaled that the market was overbought and due for a correction. Gold's relative strength index (RSI), a measure of momentum, had recently hit 90, its highest level in decades, indicating extreme overbought conditions. Furthermore, a 'gamma squeeze' effect from options trading, which had mechanically pushed prices higher during the rally, began to unwind, forcing dealers to sell as prices fell and amplifying the downward momentum.

In response to the extreme price swings, the CME Group announced it would raise margin requirements for Comex gold and silver futures. Effective from the following Monday, silver margins were set to increase from 11% to 15%, and gold margins from 6% to 8%. This move was designed to ensure traders had adequate collateral to cover potential losses amid the heightened volatility, but it also had the effect of making it more expensive to hold speculative positions, likely contributing to the sell-off.

Market Outlook and Investor Strategy

Despite the sharp rout, many analysts believe the long-term fundamentals for precious metals remain intact, supported by ongoing geopolitical tensions and macroeconomic uncertainty. The industrial demand for silver, particularly in green technologies like solar panels and electric vehicles, is expected to provide a strong floor for prices. However, in the short term, volatility is expected to persist. Pranav Mer of JM Financial Services advised caution, recommending that existing investors use trailing stop-losses.

Analysts warned that trading activity might be subdued ahead of the Chinese Lunar New Year on February 16, as China is a top consumer of metals. Market participants remain cautious, anticipating further sharp swings as the market digests the recent events and looks for new direction. For now, the crash serves as a stark reminder of the inherent volatility in commodity markets, especially after periods of rapid price appreciation.

Conclusion

The dramatic crash in silver and gold prices was a multifaceted event driven by a confluence of profit-taking after a historic rally, a fundamental shift in currency markets due to U.S. policy changes, and the unwinding of over-leveraged technical positions. While the immediate shock has been significant, the underlying drivers of safe-haven demand and industrial consumption remain relevant. Investors will be closely watching for signs of stabilization and further cues from global economic data and central bank policies.