Silver down 8% from record highs as easing trade tensions cap safe-haven demand

Silver prices sink from record highs.

After shining bright and notching life-time highs, silver prices recorded a sharp pullback on the Friday, October 17 session. On the Multi Commodity Exchange, silver futures sank nearly 10 percent from their highs. On the global front, silver tumbled six percent, giving up its all-time high of $54/oz.

Silver prices have been on a tearaway rally, soaring as the demand for the safe-haven metal jumps. Additionally, since the metal is also utilised for manufacturing purposes, the momentum has been unstoppable. This has resulted in a sharp supply constraint, adding further steam to silver's rally.

However, on Friday, the safe-haven demand for silver prices eased as trade tensions between U.S. and China softened. President Donald Trump admitted that the additional 100 percent tariffs he proposed on China were not sustainable, but Beijing "forced him to do it."

As a result, from a record high of Rs 1,70,415 per kg on the MCX, silver prices hit a sharp low of Rs 1,53,700 per kg on Friday, a drop of nearly 10 percent. The precious metal managed to claw back some gains to settle at Rs 1,57,300, higher by 0.44 percent on the commodity exchange. Globally too, silver's asking price tumbled from $54 per ounce to $51.5 an ounce, putting a pause to the rally.

The metal traded near the flat-line on Monday, October 20, quoting Rs 1,56,755 per kg, eking out gains of 0.1 percent. From its all-time high, silver prices are down 8 percent. Analysts pointed out that silver may also fall on profit-booking, as investors cash in on their gains.

However, according to Motilal Oswal, the future for the precious asset is shining. Silver market is currently exhibiting dynamics consistent with a major structural revaluation, distinguishing current rally from previous speculative cycles, the brokerage noted.

The metal's volatility, which sees silver move approximately 1.7 times faster than gold in either direction, confirms that the current rally is fundamentally stronger than speculative bursts seen in 1980 or 2011.

"The underlying industrial demand foundation is irreplaceable, suggesting that the established supply constraints will necessitate sustained price elevation to ration industrial consumption and incentivize marginal supply increases," said Motilal Oswal.

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