Silver Price Crash: White metal slumps 9%, MCX near-month futures crack below Rs 2,39,350 mark—What's fuelling the fall?

Silver Price Crash: Domestic silver rates crashed late on Thursday tracking global benchmarks. On commodity derivative exchange MCX, the white metal's near-month contract -- with March 5 expiry -- slumped as much as 9.0 per cent to trade below the Rs 2,39,350 mark in the fag-end of the evening session. Analysts said profit-booking in the precious and industrial metal following a record run over the past few weeks could be fuelling the fall in silver, expecting precious metals to remain volatile over the next few weeks.

At 10:51 pm, the March 5 contract was down 8.3 per cent at Rs 2,41,269, having breached the lower circuit thrice to slide to as low as to Rs 2,39,347.

The next-month (May 5) contract stood down 6.8 per cent at Rs 2,51,941 after sliding to as low as Rs 2,45,907 during the session.

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At the current levels, silver futures have retreated around 7-8 per cent from their peaks.

The March 5 and May 5 contracts registered lifetime highs of Rs 2,50,954 and Rs 2,70,294 over the past few weeks, respectively.

What's causing the domestic silver futures to crash?

Domestic silver futures tracked global benchmark rates. At 12:20 pm EST (10:50 pm in India), COMEX silver traded down by $7 -- or 8.3 per cent -- for the day at $76.93 per ounce. That was moments after the contract plummeted to $74.87 an ounce -- the lowest intraday level recorded since February 6.

The dollar index inched higher to 96.91 after gyrating in the 96.74-97.07 range so far on Thursday.

The barometer gauges the greenback against six currencies, excluding the rupee.

But what caused the global benchmark to slide?

"Gold and silver prices crashed after a Bloomberg media report suggested that Russia is considering returning on the dollar payment system and also readying for making big negotiation relating to oil, gas and critical minerals with the US," said Manoj Kumar Jain, director at Prithvi Finmart.

"The market has reacted highly negatively to Bloomberg reports. There is no aofficial confirmation from the US and Russia on these media reports... We are experiencing very high market volatility in the bullion markets amid US inflation data, the US-Iran nuclear deal talks, Chinese Lunar new year holidays and US-Russia negotiation reports," added the analyst.

Some analysts also say that metals have been volatile since US President Donald Trump named Kevin Warsh as his pick for the next Fed Chair.

Key levels to watch out for

According to Jain:

• Silver has support at $70-65 an ounce and resistance at 80.40-84.80 per ounce
• On MCX, silver has support at Rs 2,28,800-2,20,000 and resistance at Rs 2,44,000-2,51,000
• One should avoid fresh positions in both precious metals until clarity emerges on these reports

Rupee vs dollar (INR vs USD)

Earlier on Thursday, the rupee appreciated by 17 paise to close at a provisional 90.61 against the US dollar.

Typically, dollar strength exerts downward pressure on precious metals -- including the white metal -- as it makes them more expensive for those holding other currencies. This, in turn, hampers the safe-haven appeal of precious metals, denting their demand as well as prices.