Silver prices traded sharply lower on Monday, February 2, extending the fallout from Friday’s historic sell-off, as global markets continued to unwind crowded long positions amid a stronger dollar and shifting expectations around US monetary policy.
On MCX, silver futures slipped over 3% to around Rs 2,57,000 per kg, tracking weakness in global prices. Internationally, the metal had already seen extreme volatility.
What triggered the sharp fall in silver?
Global shock from Friday’s historic crash
Silver had plunged 26% on Friday, marking its biggest-ever single-session decline, after an intense rally to record highs left the market heavily overextended. The selling pressure carried into Monday’s session, with COMEX silver falling as much as 7% to around $79 per ounce before recovering above $85 per ounce.
Kevin Warsh nomination fuels dollar strength
The primary trigger for the crash was news that US President Donald Trump plans to nominate Kevin Warsh as the next Chair of the US Federal Reserve.
Warsh is widely seen as a hawkish inflation fighter, raising expectations of tighter monetary policy and fewer rate cuts. This pushed the US dollar sharply higher, pressuring dollar-denominated commodities like silver.
Aggressive profit booking after a relentless rally
Silver had surged to historic highs on the back of:
- A structural deficit in the global silver market
- The so-called debasement trade, as investors rotated out of currencies and bonds into physical assets
- Strong safe-haven demand amid geopolitical and economic uncertainty
As sentiment turned, traders rushed to lock in gains, accelerating the downside.
Momentum trades unwind sharply
Momentum buying had significantly amplified silver’s rally in recent months. A wave of aggressive buying — particularly from Chinese speculators — added froth to prices. Once the trend reversed, the same positioning intensified the sell-off, leading to sharp intraday swings.
Why MCX silver is under pressure today
MCX prices are reflecting:
- Spillover weakness from COMEX
- Long liquidation after extreme volatility
- A stronger dollar environment
The move lower is largely being driven by position unwinding rather than a sudden collapse in physical demand.
Bigger picture: volatility after a crowded trade
Silver’s rally over the past year shocked even seasoned traders, driven by fears around:
- Rising government debt
- Currency debasement
- The Federal Reserve’s independence
However, soaring prices and volatility strained risk limits and balance sheets, leaving the market vulnerable to violent corrections once macro signals shifted.
Bottom line
Silver’s fall today is the result of a violent unwind of an overcrowded trade, triggered by a hawkish shift in Fed expectations, profit booking after record highs, and extreme volatility spilling over from global markets. While near-term swings remain intense, the move reflects positioning stress rather than a collapse in silver’s long-term fundamentals.
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