Silver prices experienced a brutal reversal following the government's import duty hike, with MCX silver plunging nearly 11% or ₹32,624 per kilogram from ₹3.04 lakh in just two trading sessions. The carnage was most severe on Friday when prices plunged 6% or ₹17,500, completely erasing all post-hike gains that had briefly pushed silver above ₹3 lakh per kg. According to The Economic Times, this represents a complete erasure of all gains that had followed the Centre's decision to raise gold and silver import duties to 15% in a bid to arrest the rupee's slide to record lows. Before the duty increase, silver futures had settled around ₹2.79 lakh per kg on May 12, with prices spiking on May 13 after the higher customs duty pushed up landed costs. The latest data from MCX shows that the bounce has completely reversed, with silver now erasing all post-hike gains.
The sharp decline was primarily attributed to demand destruction at elevated price levels, as reported by The Economic Times. Unlike gold, silver has a large industrial demand component, with usage spread across sectors such as solar panels, semiconductors, electric vehicles, batteries, electronics, AI infrastructure and green energy systems. As reported by The Economic Times, geopolitical tensions linked to the Iran conflict initially triggered safe-haven buying across precious metals, but markets later began to focus on the potential impact of prolonged elevated oil prices on global growth momentum. That concern tends to affect industrial metals more heavily than pure defensive assets, causing silver to increasingly trade like an industrial commodity rather than a traditional safe-haven hedge. India, which remains the world's largest silver importer, could see weaker domestic demand after the sharp increase in import duty, with the jump materially raising local prices and potentially hurting jewellery demand while slowing industrial imports.
According to analysts cited by The Economic Times, if the Iran conflict keeps crude oil prices elevated for an extended period, central banks may maintain a hawkish stance due to inflation risks. Higher interest rates typically weigh on precious metals as non-yielding assets become less attractive relative to interest-bearing investments. The initial surge in prices was largely a duty shock reaction, with the market recognizing that while changes in import duty can temporarily distort domestic prices, they cannot fundamentally alter global silver market dynamics over the long term. The market soon recognised that while changes in import duty can temporarily distort domestic prices, they cannot fundamentally alter global silver market dynamics over the long term.
Silver futures witnessed a sharp blow-off move towards the ₹2,95,000-3,00,000 zone before facing strong rejection at higher levels, as reported by The Economic Times. Such price action often signals exhaustion buying near peaks alongside the emergence of aggressive supply pressure. The current chart structure is beginning to show signs of exhaustion after the recent vertical rally. The market is now correcting towards the 50 EMA region, which is acting as immediate dynamic support. Overall, silver appears to be entering a highly volatile phase in the near term, with profit booking, sharp price swings and consolidation likely after the recent rally. However, the medium-term outlook continues to find support from strong industrial demand trends and persistent supply tightness.
From a longer-term perspective, silver continues to remain one of the strongest structural commodity themes globally, supported by rising demand from AI infrastructure, green energy transition, solar capacity expansion, electronics manufacturing and electric vehicle growth. However, Tata Mutual Fund noted in a recent report that the deteriorating global economic outlook could limit silver demand over the medium term, with slower solar installations and liquidation of large long positions easing supply tightness in global markets. The fund house suggested a staggered investment approach for medium- to long-term investors given the commodity's volatile nature, adding that silver remains a developing long-term growth story, but its broader trajectory will depend heavily on a sustained recovery in industrial demand.
