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.

The precious metals rally that drove gold and silver to record levels continues to gain momentum, with market experts forecasting sustained price increases through 2026. However, investors are advised to prepare for increased volatility as speculative interest could trigger sharp price swings in both directions.

Expert Consensus Points To Continued Rally

A comprehensive poll of 10 commodity market participants reveals unanimous bullish sentiment for both precious metals. All respondents expect prices to continue rising, with 80% predicting silver will outperform gold during the year.

"Both metals are entering 2026 with strong fundamentals, though returns may normalise," said Naveen Mathur, director - commodities and currencies at Anand Rathi Shares & Stock Brokers. "Gold should continue to perform steadily while silver, despite higher volatility, may continue to outperform gold in percentage terms."

Silver Price Targets Show Aggressive Upside Potential

Market participants have set ambitious targets for silver, with 60% expecting international prices to reach at least $100.00 per ounce, representing nearly 40% upside from current levels of $72.00.

Performance Drivers Remain Robust

Gold has surged 62% supported by central bank buying, expectations of lower global interest rates, geopolitical uncertainty and a softer dollar outlook. Silver's even more impressive 144% surge reflects these same factors plus growing industrial demand shortages.

"Silver has the combined status of industrial and precious metal, which makes it more attractive," said Saumil Gandhi, senior analyst — Commodities at HDFC Securities. "Strong industrial and investment demand, combined with steady supply levels, has pushed the silver market into multiple years of deficit, and this trend will likely persist in 2026 as well."

Supply Constraints Support Price Outlook

Industrial applications in rapidly growing sectors including solar panels, electric vehicles and AI-related technologies continue driving silver demand. This industrial component distinguishes silver from gold and supports the outperformance expectations.

Previous analysis highlighted potential supply sources that could emerge at elevated price levels, including previously unviable mining operations and increased e-waste recovery. However, current market dynamics suggest demand growth continues outpacing these potential supply increases.

Investment Strategy: Cautious Optimism Recommended

Despite the bullish outlook, experts unanimously recommend measured approach to precious metals allocation. The consensus advises against rushing into positions after 2025's substantial gains.

"It's time to be cautious in allocation after the recent run up," said Navneet Damani, head of research-commodities & currency at Motilal Oswal Financial Services. "Buying aggression should be measured because bouts of correction (say be 7-10%) could come in. That should be the time to accumulate again."

The strategy emphasizes buying on dips rather than chasing current momentum, acknowledging that speculative interest could create sudden reversals alongside the expected upward trajectory.