Gold, silver, copper prices decline up to 13% after record rally: 4 key reasons behind fall in commodity prices

Gold, silver, copper prices decline

• Gold, silver, and copper prices dropped sharply after recent record highs
• Geopolitical easing and China export limits among reasons leading to the decline.
• Profit-booking and CME margin hike also impacted commodity prices

Did our AI summary help?

The prices of gold, silver and copper sharply dropped on December 29, after seeing a significant bull run. Easing geopolitical tensions and China’s export restrictions were among four key reasons behind the downturn.

Gold futures with February expiry fell around 2 percent after nearing their lifetime high levels to fell to Rs 1,37,646 per 10 grams. The futures with April and June expiries also fell nearly 2 percent after hitting fresh all-time highs earlier during the day.

Silver futures with March expiry dropped 8 percent after hitting a fresh lifetime high to Rs 2,32,663 per kilogram. The futures contracts with May and July expiries also erased all gains, falling 9 percent and 10 percent respectively after hitting fresh lifetime highs during the day.

After hitting a fresh lifetime high of Rs 1,392.95 per kilogram, Copper futures with January expiry fell 13 percent to Rs 1,211.05 per kilogram. The contracts with February and March expiries also erased all gains after hitting new all-time highs and slipped into the red.

Here are the possible reasons behind the fall in the commodity prices:

Profit-booking:

The fall in gold, silver and copper prices may have been driven by profit-booking. "On the technical front, after a staggering rally of 2025, we don't expect similar returns in 2026,” said Pranav Mer, Vice President, EBG, Commodity & Currency Research, JM Financial Services.

The sharp rally in the prices fuelled by rate cuts, global trade tensions and more may have led to investors to book some profits at elevated levels.

Easing geopolitical tensions:

US President Donald Trump met Ukrainian President Volodymyr Zelenskyy at the former’s Mar-a-Lago residence in Florida. The two leaders said that negotiations on a peace plan to end the war with Russia is nearing completion.

“We had great discussions on all the topics, and we appreciate the progress that the Americans and Ukrainian teams made in these recent weeks...We discussed all the aspects of the peace framework...There has been 90 percent agreement on the 20-point peace plan, 100 percent agreement on US-Ukraine security guarantees, and U.S.-Europe-Ukraine security guarantees are almost agreed. Military dimension 100 percent agreed. The Prosperity Plan is being finalised and we also discussed the sequencing of the following actions. We agreed that security guarantees are a key milestone in achieving lasting peace and our teams will continue working on all aspects,” said Zelenskyy.

#WATCH | Ukrainian President Volodymyr Zelenskyy says, "...We had great discussions on all the topics, and we appreciate the progress that the Americans and Ukrainian teams made in these recent weeks...We discussed all the aspects of the peace framework...There has been 90 per… pic.twitter.com/JsOkfMEqMd

— ANI (@ANI) December 28, 2025

The rising hopes for easing geopolitical tensions following the prospective peace deal may have affected the safe-haven metals.

"Gold prices are trading at an elevated premium, and downside risks could emerge if a hawkish pivot by the Federal Reserve were to surprise and/or large ETF outflows were to affect the market," UBS analysts said in a note.

China supply constraint:

According to reports, China has announced that it will restrict the export of physical starting from 2026, and businesses will be required to apply for export licenses. This policy will be in effect until 2027.

World’s richest person Elon Musk took to X (formerly Twitter) to react to the reports. “This is not good. Silver is needed in many industrial processes,” he wrote.

This is not good. Silver is needed in many industrial processes. — Elon Musk (@elonmusk) December 27, 2025

“Proposed export licensing requirements starting January 1, 2026 further signal tighter control over outbound flows, restricting the availability of physical metal in global markets at a time when other inventory hubs are already under pressure,” said Motilal Oswal Financial Services.

Navneet Damani, Head of Research – Commodities at Motilal Oswal Financial Services, said, "The silver market in 2025 has moved beyond a conventional bull cycle and entered a structural phase, driven by prolonged physical supply deficits, inventory depletion, and policy-led supply constraints. The widening disconnect between paper pricing and physical availability highlights deeper stress in global price discovery mechanisms."

CME Margin hike:

The fall in silver prices also comes after US-based CME Group announced new regulations on Friday (December 26). The CME Group, which operates major derivatives exchanges such as CME, COMEX, CBOT and NYMEX, announced it was imposing a $25,000 initial margin for March 2026 silver derivative contracts. Earlier, it was imposing $20,000 margin.

If investors do not have the required amount in their accounts by today, their positions will be liquidated. This change may have also boosted investor sentiment.

As a result of the fall in the commodity prices, Hindustan Zinc and Hindustan Copper shares declined sharply from their respective intraday highs.

Follow all LIVE updates from the stock markets here.