Silver prices plummeted to Rs 37,171 per kg on March 16 due to unwinding of long positions after a hike in margin calls forced traders to reduce their positions.
The US Federal Reserve in an emergency move on March 15 cut its key rate by 100 basis points to 0-0.25 percent to shield the economy from the coronavirus impact.
In the futures market, silver for May delivery touched an intraday high of Rs 41,099 and a low of Rs 36,844 per kg on the MCX. So far in the current series, the precious metal has touched a low of Rs 36,844 and a high of Rs 50,123.
The value of May and July contracts traded so far is Rs 2.361.36 crore and Rs 55.18 crore, respectively.
Commenting on the March 16 fall, Navneet Damani, Vice President, Motilal Oswal, said ‘there is no specific reason why silver price have fallen’.
The gold/silver ratio currently stands at 108.19 to 1, which indicates the amount of silver required to buy one ounce of gold. The ratio has jumped from 99 to 116 in the last five trading session.
Speaking on the road ahead for the precious metal, Motilal Oswal said it may further test its lower support zone of Rs 37,500/kg. "MCX Silver traded on a negative note last week and closed lower by around 13.80 percent. It has broken its important support level of Rs 43,400 and has given a weekly close below the same, which indicates that the bearish momentum in the commodity is likely to continue."
The brokerage advises traders to sell on every rise. On the technical charts, Rs 43,700 remains critical resistance, while intermediate resistance is placed at Rs 42,500 levels.
On the London Metal Exchange, spot silver has strong short-term support at $13.50, whereas resistance is seen at $15.90 levels. At 10:05 (GMT), the precious metal fell 8.7 percent to $13.23 an ounce in London trading.
Damani sees prices falling further to $12.5 per ounce, where it could find some stability.
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