Silver prices witnessed a sharp rally on Friday, January 9, with MCX silver futures hitting the 4% upper circuit, driven by a combination of supportive global cues, shifting US interest rate expectations, and technical factors.
Silver jumps on MCX amid strong global momentum
Silver futures on the Multi Commodity Exchange (MCX) surged to around Rs 2,53,000 per kg, marking a 4% single-day jump, as buying interest intensified through the session. The sharp move followed a rebound in global silver prices after recent selling pressure eased.
In the international market, spot silver climbed over 2% to around $78.4 per ounce, and was on track for a strong weekly gain, providing a positive lead to domestic prices.
Key reasons behind silver’s 4% surge
Weaker US jobs data fuels rate-cut expectations
The primary trigger for the rally was softer-than-expected US labour market data. December non-farm payrolls increased by just 50,000, missing market expectations, while the unemployment rate eased to 4.4%. The data reinforced expectations that the US Federal Reserve could move towards interest rate cuts later this year.
Lower interest rate expectations tend to reduce real yields, which boosts demand for non-yielding assets like silver and gold.
Short covering after recent liquidation
Silver had seen heavy selling in recent sessions, partly due to annual commodity index rebalancing. As that pressure faded, traders rushed to cover short positions, amplifying the upside move, especially in a low-liquidity environment.
Weaker dollar and easing real yield pressure
The repricing of US rates led to a softer dollar and reduced real yield pressure, creating a favourable backdrop for precious metals. This encouraged fresh long positions in silver futures.
Geopolitical and macro uncertainty
Ongoing geopolitical tensions and broader macroeconomic uncertainty added to silver’s appeal as a hedge, providing secondary support to prices.
Thin liquidity amplifies gains
Market participants noted that thin trading volumes further exaggerated the price move, allowing silver to hit the upper circuit quickly once buying momentum picked up.
Outlook
Silver’s sharp move highlights its sensitivity to US macro data, interest rate expectations, and positioning dynamics. With markets closely tracking upcoming economic indicators and central bank signals, volatility in silver prices is likely to remain elevated in the near term.
Disclaimer: Commodity prices are volatile and subject to rapid changes based on global economic data and geopolitical developments.