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.

Spot silver has experienced a dramatic decline, extending its recent losses to trade at $80.49 per ounce. The precious metal has fallen over 30%, marking a significant downturn in silver prices.

Current Market Performance

The latest trading data shows spot silver continuing its downward trajectory, with the metal now priced at $80.49 per ounce. This represents a substantial decline of over 30% from previous levels, indicating intense selling pressure in the precious metals market.

Market Dynamics

The extended decline in spot silver reflects the challenging conditions currently facing precious metals. The over 30% drop demonstrates the significant volatility that has characterized silver trading, with the metal unable to find support at current price levels.

The continued weakness in silver prices highlights the broader pressures affecting the precious metals sector, as investors navigate uncertain market conditions and shifting commodity dynamics.