Expert Explains Why Futures Plunged 10%
The dramatic drop in Indian futures followed a severe slump in global prices, where US spot silver fell as much as 6% on Friday, marking its largest single-day decline in six months.
Globally, silver recovered slightly to close down 4.75%, after peaking at $54.63 and settling at $51.86 an ounce. According to Anuj Gupta, the magnitude of the correction, a drop of 16,715 points, is unprecedented. “The biggest correction in silver by 16,715 points from day’s high to day’s low in silver since inception,” stated Gupta.
The pullback in precious metals was attributed to several factors that calmed market anxieties, which in turn reduced the appeal of safe-haven assets.
Gupta cites concerns over US credit quality and China-US trade tensions easing following the comments from President Donald Trump, as a factor that helped stabilise global trade worries.
“Positive results from regional banks helped stabilise the stock market and pushed bond yields higher. The resulting rise in interest rates typically pressures gold and silver prices, as these metals are non-yielding assets,” he said. Further, the signs of easing in the historic silver squeeze in the London market led to widespread profit-taking among investors, he added.
Zooming out, the decline was not limited to silver, as gold also pulled back from its recent rally. US spot gold was down 3% at $4,186.4 an ounce. On the MCX, the yellow metal’s futures dropped nearly 5% from its day’s high of Rs 1,32,294 per 10 grams to an intraday low of Rs 1,25,957, though it ended the session with minor 0.25% gains.
