A severe financial crisis has engulfed Rajkot's silver trading community, with 44 traders declaring insolvency amid a dramatic surge in global silver prices. According to a report by local newspaper Gujarat Mirror, these traders face combined liabilities totaling ₹3,500 crore after being caught in an unprecedented market squeeze.

Crisis Unfolds as Silver Crosses Critical Threshold

The financial turmoil erupted when silver prices skyrocketed beyond ₹1.25 lakh per kilogram, trapping numerous Rajkot-based traders who had positioned themselves for stable or declining prices. These traders, confident that silver would not breach the ₹1.25 lakh threshold, continued selling short positions throughout the rally.

The gap between the traders' selling prices and current market rates, known locally as valan, expanded to unmanageable proportions as silver prices continued their relentless climb. This price differential created insurmountable financial burdens for the short-positioned traders.

Emergency Meeting Reveals Scale of Losses

Facing mounting pressure, the affected traders convened an emergency meeting on Saturday night where 44 participants admitted their inability to settle outstanding debts. The meeting marked a collective surrender to the market forces that had overwhelmed their positions.

"The dealers were confident the price would not cross the ₹1.25 lakh threshold and continued to sell," the Gujarat Mirror report stated. "When the prices crossed that mark, the financial burden of the price difference became impossible to bear."

The crisis has prompted some traders to take drastic measures, with reports indicating that several have shuttered their operations and fled the market entirely.

Ripple Effects Spread Across Trading Networks

The Rajkot crisis has generated shockwaves throughout interconnected trading networks, extending far beyond the city's boundaries. The impact has reached major commercial centers including:

• Ahmedabad: Connected trading operations assessing liability exposure
• Indore: Regional trading networks evaluating risks
• Dubai: International connections tallying related obligations

Trading partners and counterparties across these locations are now working to calculate their exposure to the Rajkot traders' defaults, potentially amplifying the crisis's reach.

Market Context and Trader Positioning

The current crisis stems from traders' miscalculation of silver's price trajectory following the precious metal's stellar performance. Silver had delivered outstanding returns, leading many traders to expect a price correction or stabilization. However, the continued rally caught short-sellers in a squeeze, forcing them to cover positions at significantly higher prices than anticipated.

The situation highlights the risks associated with short-selling strategies in volatile commodity markets, particularly when traders maintain concentrated positions beyond prudent risk management thresholds.

After delivering exceptional returns in 2025, gold and silver have transformed from portfolio hedges to potential core holdings. The precious metals rally continues gaining momentum, with market experts now setting even more ambitious price targets while acknowledging evolving market dynamics.

Structural Forces Drive Long-Term Bullish Outlook

Early bulls who predicted gold's rise are doubling down on their forecasts. Edward Yardeni, president of Yardeni Research, and private investor Naresh Katariya, who flagged the possibility of gold reaching $4,000 when prices hovered near $2,950 nine months ago, now see even higher targets ahead.

"A lot of investors who didn't do well in 2025 have realised gold was the more stable place to be," Yardeni said, pointing to Chinese investors affected by property losses and volatile equity markets as fresh sources of demand. He now sees gold potentially reaching $6,000 by year-end and $10,000 by decade-end, driven by portfolio rebalancing rather than traditional valuation metrics.

Central Bank Buying Remains Key Support

Central bank purchases continue supporting gold prices, even with moderated pace. Latest estimates show disclosed purchases at around 800-900 tonnes in 2025, slightly below the 1,000-tonne average of recent years. However, unreported buying may understate actual demand.

The shift toward physical control reflects growing geopolitical sensitivity, with India alone repatriating over 300 tonnes in the past five years.

Global Ownership Remains Surprisingly Low

Despite recent gains, global gold ownership outside India remains minimal. Goldman Sachs estimates total US investor exposure at just 21 basis points, contrasting sharply with Morgan Stanley's CIO recommendation of 20% portfolio allocation.

Yardeni describes gold as a 'sleeper asset' that investors ignored for decades in favour of stocks and bonds. This changed decisively after gold broke above $2,000 in 2024, triggering broader institutional interest.

Silver Faces Mixed Dynamics Ahead

Silver's trajectory may prove more volatile than gold's steady ascent. Commodity expert Anuj Gupta expects short-term volatility as global indices rebalance, potentially reducing silver weightings while increasing exposure to energy and industrial metals like copper.

Despite rebalancing pressures, Gupta doesn't expect deep corrections. Rising allocations to industrial metals could indirectly support silver given its manufacturing and electronics applications.

Investment Strategy: Measured Approach Recommended

Experts maintain their cautious optimism while acknowledging the changed landscape. The consensus continues favouring measured allocation strategies after 2025's substantial gains.

"It's time to be cautious in allocation after the recent run up," advises Navneet Damani, head of research-commodities & currency at Motilal Oswal Financial Services. "Buying aggression should be measured because bouts of correction could come in. That should be the time to accumulate again."

The strategy emphasizes buying on dips rather than chasing momentum, recognizing that while structural factors support higher prices, short-term volatility remains likely as markets adjust to new realities.