Silver exchange-traded funds (ETFs) saw a dramatic 38 per cent drop, from their peak just seven days ago on January 29. This sharp decline was triggered by increased trading costs and investors cashing out profits. The market saw wild swings as silver prices first fell below $65 per ounce before bouncing back up by 8.6 per cent to $77.33 on Friday.The market turmoil intensified when CME Group, a major trading platform, raised the money needed to trade silver futures. This was their third such increase in just two weeks. The higher costs forced many traders to sell their holdings quickly. Adding to the pressure were concerns about the Federal Reserve’s strict monetary policy after Kevin Warsh’s nomination and a stronger US dollar.“Last week’s steep plunge was driven by hawkish Fed expectations after Kevin Warsh’s nomination, a stronger dollar, and sharp CME margin hikes that forced leveraged unwinding,” said Hareesh V, who leads commodity research at Geojit Investments Limited. He added that profit-taking after reaching record highs made the market even more unstable, as quoted by ET.The recent events have shown how quickly silver prices can change. These sudden price moves have left many investors nervous about the market’s stability. The combination of higher trading costs, profit-taking, and broader economic factors has created a perfect storm in the silver market.
Time to invest?
Fund managers are encouraging investors to consider silver investments despite recent volatality, recommending a systematic approach for long-term gains. While silver prices have fallen sharply from recent highs above $120, experts believe the fundamental outlook remains strong due to supply deficits and robust industrial demand, though they emphasize the importance of careful position sizing and risk management.“Yes, at current levels investors can consider taking exposure to silver ETFs with a long-term perspective and through a systematic approach,” said Satish Dondapati, Fund Manager at Kotak Mahindra AMC, as quoted by ET. He advised limiting precious metals allocation to 15-20% based on risk tolerance.The recent price decline was amplified by silver’s thin market structure. “Silver has come off mainly because it has run up too fast in a short period,” said Akshat Garg, Head of Research & Product at Choice Wealth. He noted that silver typically shows more dramatic price swings than gold due to its smaller market size.Technical signs suggest prices may stabilise soon, according to ET analysis. Silver now trades in the $71-$80 demand zone, with support near $64 matching the 100-day moving average. This indicates potential recovery after the correction from $120 levels.Wealth managers strongly recommend a staggered buying approach over lump-sum investments. “Investors should avoid chasing prices or reacting to day-to-day moves. Silver works best as a small, supporting allocation in a portfolio, not as a core holding,” Garg advised.Experts emphasised staying focused on long-term fundamentals like geopolitical tensions and central bank policies while monitoring the dollar and Fed signals. They suggest the recent decline may offer opportunities for those who missed earlier gains, provided they can handle continued market volatility.“For long-term investors, this phase is about patience and discipline rather than action,” Garg added. A move above $80-$85 could signal further recovery toward $100-$105, though investors should prepare for ongoing market turbulence, according to him.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
