Silver prices fall 22% in 10 days

Silver continued its downward streak for the fifth straight day by falling below the Rs 60,000-a-kg mark on Thursday due to heavy sell-off by speculators, amid a weakening global trend.

On Thursday, in Mumbai spot market, silver lost Rs 3,860 to close at Rs 58,655 a kg, 22 per cent lower to its all-time high of Rs 75,020 a kg on April 25. A fortnight ago, silver in spot market was quoted at premium of Rs 1,500-2,000 a kg compared to the landed cost due to scarcity of metal in the market which has almost disappeared as metal prices have fallen sharply globally.

Apart from profit booking by the fund houses and successive margin hikes by Chicago Mercantile Exchange (CME), the sharp fall in prices has been attributed to heavy profit booking in silver when the white metal reached all-time high of $49.8 at COMEX market.

CME said it will raise margins from May 9 to $21,600 per future contract from $16,200 per contract.

Also, maintenance charges were increased to $14,000 from $12,000, which will be introduced in steps. Margins, are the fund that exchange keeps for allowing a trader to trade and it is raised to control the volatility in a particular commodity.

In global markets, silver investors have resorted to heavy profit bookings in the last four days. Price was trading at $37.75 an ounce.

According to an analyst with Barclays, “Silver ETP (fund) holdings fell by 520 tonnes yesterday, the second-largest daily fall in ETP holdings – the largest being 555 tonnes in January 2008. Silver ETPs suffered net redemptions of 1,105 tonnes in seven days. Total metal held declined by just under 10 per cent.”

Gold, on the other hand did not see a sharp fall, declining 0.4 per cent to Rs 21,905 a kg in Mumbai spot market. In international market, gold was trading at $1,503 currently. Gold had touched all-time high of Rs 22,710 per 10g in Mumbai on April 30.

Gold found support from positive news of fresh buying by the central bank. The latest IMF statistics showed Mexico had increased its gold reserves by over 90 tonnes since January. Meanwhile, Russia increased its holdings by 18.8 tonnes to 811.1 tonnes and Thailand bought 9.3 tonnes to 108.9 tonnes in March.

“There are talks that a big market player has exited the silver market by selling huge positions,” said an analyst with domestic broking house.

The 100-day moving average of silver stood at $34 an ounce but the 200-day moving average is expected to be at $29 an ounce on COMEX spot, said Rajeev Darji, senior research analyst, Globe Capital.

Going by the technical levels, he said, Rs 47,000-50,000 a kg is a good buying level for retail investors to invest in the commodity, as the long-term outlook for silver still remains positive.