Silver futures on Multi Commodity Exchange (MCX) surged over 5% on Monday to breach the significant ₹3 lakh per kilogram barrier, as geopolitical tensions and safe-haven demand propelled precious metals to fresh record highs. The rally was triggered by US President Donald Trump's bid to acquire Greenland and threats of punitive tariffs on European nations, creating a flight to precious metals that has driven silver ETFs up 30% year-to-date in 2026.

Record-Breaking Performance Across Precious Metals

The white metal's ascent to $93 per ounce represents what Aamir Makda, Commodity & Currency Analyst at Choice Broking, describes as "a level once considered unthinkable." Gold futures also participated in the rally, climbing 1.75% to ₹1,45,000 per 10 grams and marking fresh all-time highs for both metals.

Geopolitical Catalysts Drive Market Sentiment

"Gold and silver are no longer just commodities, they are geopolitics in metal form," said Amit Jain, Co-Founder of Ashika Global Family Office Services. "When major powers fight over resources like Greenland, markets instinctively price in risk, and precious metals become the default refuge. This rally reflects not speculation, but a deeper loss of confidence in global stability."

Trump's proposed 10% tariff hike on European countries, potentially escalating to 25% by June, has intensified what Makda characterizes as a "perfect storm" of industrial scarcity and geopolitical chaos. Over the past year, silver has skyrocketed more than 170%, while gold has gained over 70%.

Technical Analysis Signals Caution

Despite the bullish momentum, technical indicators are flashing warning signs. Makda noted: "We have observed a RSI bearish divergence on the daily charts, which is a classic 'Red flag' warning. It suggests that while the price is still climbing and hitting new peaks, the internal momentum driving those gains is actually weakening."

Falling open interest levels in March contracts point to "long unwinding," prompting Makda to advise that "traders who already have long positions should look for profit-booking at current levels."

Fundamental Drivers Support Long-Term Outlook

Silver's transformation from a monetary metal to a crucial industrial commodity continues to underpin demand. Key drivers include:

• Surging solar photovoltaic expansion
• Electric vehicle production requiring significantly more silver than traditional cars
• AI data centers reliant on silver-based components
• Global supply deficit projected at 230 million ounces in 2026
• China's strict export licensing and stagnant mining output

"The rally is mainly attributed to strong global geopolitical uncertainty, supply-side concerns, a weakening US dollar, and robust industrial as well as investment demand," explained Satish Dondapati, Fund Manager at Kotak Mutual Fund. "Silver, being an industrial metal as well, has an added advantage in the current macroeconomic scenario."

Investment Considerations and Market Outlook

The gold-to-silver ratio has collapsed to its historical average of 50:1, indicating silver's dramatic outperformance relative to gold. However, domestic investors should note that HDFC Securities has cautioned about potential import duty reductions on precious metals in the upcoming Union Budget, which could create "short-term headwinds" for domestic prices despite the bullish long-term outlook.

Vishal Kapoor, CEO of Bandhan AMC, emphasized the importance of investment vehicle selection: "Gold and silver can play a meaningful role in portfolio diversification, but the way investors access these assets matters. Physical metal often brings uncertainties around purity, making charges, storage, and resale, while ETFs require demat accounts that many investors still do not use."

Silver futures on the Multi Commodity Exchange achieved a historic milestone on Monday, surging past ₹3.00 lakh per kg as investors sought refuge in precious metals amid global uncertainty. The record-breaking rally reflects silver's renewed appeal as a hedge, but HDFC Securities has issued a cautionary note about potential policy-driven headwinds that could impact domestic prices in the near term.

Budget Policy Risk Threatens Rally Momentum

HDFC Securities warned that any reduction in import duties during the upcoming Union Budget could create immediate pressure on domestic silver prices, despite the metal's strong underlying fundamentals. The brokerage noted that while structural drivers for precious metals remain firmly intact, fiscal policy changes could act as a short-term headwind for Indian markets.

"However, if the government reduces import duties on gold and silver in the upcoming budget, domestic prices could come under pressure and could act as a short-term headwind for domestic prices," HDFC Securities stated in its research report.

Any duty reduction would mechanically lower landed costs, potentially triggering profit-taking after the metal's steep run-up, even if global benchmarks remain elevated.

Supply Deficit Drives Fundamental Strength

The silver market continues to face significant supply-demand imbalances that support higher prices. HDFC Securities highlighted critical market dynamics that underpin the metal's bullish trajectory:

Industrial demand has remained at record levels while investment inflows and inventory drawdowns across major global hubs have further tightened market conditions. The sharp compression in the gold-silver ratio from around 90:1 in early 2025 to approximately 57:1 indicates silver's outperformance relative to gold.

Long-Term Outlook Remains Constructive

Despite flagging budget-related risks, HDFC Securities maintained a constructive medium-term to long-term view on silver. The brokerage expects the broader bullish trend in precious metals to extend into 2026, supported by several key factors:

• Robust industrial usage maintaining demand floors
• Persistent global supply deficits
• Dovish monetary policy expectations
• Structural demand from investors and institutions
• Ongoing geopolitical risks and trade-policy uncertainty

The brokerage noted that structural demand from institutional investors has created a price floor, while geopolitical tensions continue to underpin safe-haven demand for precious metals.

Investment Recommendations and Strategy

HDFC Securities recommended that investors allocate up to 10% of their portfolios to precious metals, with flexibility to increase exposure based on individual risk appetite. The brokerage suggested that investors can capture the bullish trend through exchange-traded funds while remaining mindful of potential policy-driven volatility.

The recommendation comes as silver's surge reflects a powerful combination of supply constraints, industrial demand, and investment flows. However, the sustainability of record levels in the domestic market may depend significantly on government policy decisions regarding import duties in the upcoming budget.

For Indian investors, the interplay between global fundamentals and domestic fiscal policy will likely determine silver's near-term trajectory, even as long-term structural factors continue to support higher prices.