New Delhi (Economy India): After witnessing a sharp rally over the past few sessions, gold and silver prices saw a steep correction on Wednesday, February 5, driven largely by profit booking and higher margin requirements in global commodity markets.
On the Multi Commodity Exchange (MCX), silver futures plunged by nearly ₹26,000 per kilogram, or 9.5%, taking the price down to around ₹2.43 lakh per kg. Gold futures also weakened, with prices falling by about ₹2,000 per 10 grams, settling near ₹1.51 lakh.
Sharp Correction After Recent Rally
The current fall follows a significant decline witnessed earlier between January 29 and February 2, when silver prices had already corrected by nearly ₹1.60 lakh per kg, while gold had dropped by around ₹26,000 per 10 grams.
Market participants say the rapid rise to record highs in recent weeks encouraged investors to lock in profits, triggering heavy selling pressure.
Physical Market Prices Also Ease
According to the India Bullion and Jewellers Association (IBJA), prices in the physical market mirrored the futures decline. Silver fell by ₹28,123 to ₹2,54,339 per kg, while 24-carat gold dropped ₹4,123 to ₹1,52,502 per 10 grams.
Analysts attribute the fall to a combination of profit booking and weakening physical demand, especially after prices touched all-time highs.
Why MCX and Jewellery Market Prices Differ
Experts note that prices on MCX and in the physical bullion market often vary. MCX reflects real-time futures trading where prices fluctuate every second based on bids and global cues. Physical bullion prices, meanwhile, include costs related to transportation, storage and local taxes, leading to differences.
Higher Margin Requirements Add Pressure
SEBI-registered commodity expert Anuj Gupta pointed out that the Chicago Mercantile Exchange (CME) has raised margin requirements for precious metals, adding further pressure on prices.
Margins on gold have been increased from 6% to 8%, while silver margins were raised sharply from 11% to 15%. Higher margins mean traders must deploy more capital to hold positions, often forcing leveraged investors to liquidate holdings.
“When margin requirements rise, traders with limited liquidity are compelled to sell positions, which accelerates price declines,” Gupta said.
What Investors Should Watch
Market experts caution that bullion prices may remain volatile in the near term due to:
- Continued profit booking
- Soft physical demand at elevated price levels
- Tightening margin norms globally
Long-term investors, however, are advised to track global interest rate cues, dollar movement and central bank policies before taking fresh positions.
(Economy India)
