Silver prices experienced significant volatility with MCX futures plunging Rs 10,000 during intraday trading, highlighting the turbulent phase that has characterized the white metal following its record high of $83.60 per ounce in December 2025. The sharp decline from Rs 2,50,605 per kg to an intraday low of Rs 2,40,605 reflects intensifying market stress as investors engage in profit-booking amid a stronger US dollar environment.

MCX Silver Faces Sharp Intraday Decline

Domestic silver futures witnessed dramatic price swings as traders responded to multiple headwinds including futures selling tied to commodity index reshuffle and dollar strength making the metal costlier for overseas buyers. The US dollar hovered near a one-month high as investors assessed mixed economic data ahead of Friday's nonfarm payrolls report, adding pressure on precious metals.

The volatility demonstrates the heightened market stress that HSBC Global Research has been warning about, with dramatic intraday swings becoming increasingly common as competing market forces play out.

HSBC Maintains Bullish H1 2026 Outlook Despite Volatility

Despite current market turbulence, HSBC expects silver prices to remain elevated through the first half of 2026, supported by persistent tightness in physical markets, strong investment flows, and favorable macroeconomic conditions. The investment bank maintains its bullish near-term outlook while acknowledging increased volatility risks.

The bank points to ongoing tightness in the London physical market, record-high lease rates, and backwardation in CME futures as key supportive factors. A significant portion of silver stockpiles remains locked in New York vaults following tariff-driven shifts, with migration back to London expected later in the year.

Supply-Demand Dynamics Signal Structural Shifts

While current market conditions remain supportive for the first half, HSBC warns that fundamental challenges are emerging. Industrial demand faces headwinds from elevated price levels, with high prices encouraging substitution and thrifting. The bank expects supply responses from mining, recycling, and producer hedging to gradually assert themselves.

The narrowing deficit reflects expectations of rising mine production and recycling supply, while industrial demand faces pressure from current elevated price levels.

Second Half Correction Risks Mount

HSBC flags growing risks for the second half of 2026, warning of potential long liquidation in ETFs and net long positions on CME. The bank anticipates that physical tightness will gradually unwind as stocks migrate back and logistical distortions ease, potentially driving meaningful corrections despite near-term support from safe-haven flows and softer dollar conditions.

The current MCX volatility exemplifies HSBC's warnings about heightened market stress, with the bank's two-phase outlook reflecting the complex interplay between short-term market tightness and longer-term structural adjustments expected throughout the year.

Silver, which emerged as one of the strongest-performing commodities in 2025, may experience intermittent corrections in 2026 despite maintaining robust long-term fundamentals, according to Saif Mukadam from ICICI Direct. The precious metal delivered an eye-catching 140% rally in 2025, but current elevated levels may not support fresh investment opportunities.

Silver Outlook: Strong Fundamentals, Cautious Near-Term View

Mukadam highlighted that while silver's structural and fundamental outlook remains positive, the dramatic price movement has created challenging entry conditions. "Structurally or fundamentally, silver prices should move on the upside, but as prices have moved drastically, the current levels are not supportive. The risk-reward ratio is not favourable, and we could see a pullback," he explained.

The analyst identified several key drivers that could influence silver's trajectory in 2026:

• Policy risks: Silver's inclusion in the U.S. critical minerals list raises concerns about potential tariff impositions
• Industrial demand: Continued structural demand from solar PV, electronics, AI chips, and data centre cooling applications
• Supply dynamics: Ongoing supply constraints supporting price levels

Although industrial demand flattened in 2025 after several years of strong growth, Mukadam believes long-term prospects remain favourable, advising investors to use short-term pullbacks as buying opportunities.

Gold Expected to Outperform Silver in 2026

After significantly lagging silver's performance in 2025, gold is positioned for relative outperformance this year. While silver surged 140%, gold rallied approximately 60% to 65% during the same period.

Mukadam outlined several supportive fundamentals for gold:

• Central bank buying activities
• De-dollarisation trends
• Fiscal concerns globally
• Expectations of multiple U.S. Federal Reserve rate cuts in 2026
• Continued role as hedge against geopolitical uncertainties

However, similar to silver, Mukadam cautioned against immediate entry at current levels, stating that "the risk-reward ratio is not favourable" and advising investors to wait for pullbacks before accumulating gold positions.

Broader Commodities Outlook

Beyond precious metals, Mukadam provided insights on other key commodities. Crude oil prices are expected to remain under pressure in 2026 due to global supply surplus conditions, with OPEC unwinding production cuts and pumping additional oil into the market. The analyst expects the market to remain in surplus by approximately 2 million barrels per day.

Copper, which surged 40–45% in 2025, continues to benefit from supply-side constraints including mine disruptions and low-grade ore challenges. However, policy uncertainty regarding U.S. tariffs on refined copper could trigger volatility. Among base metals, aluminium stands out as the most attractive option, with the market expected to remain in deficit as Chinese capacity reaches limits and several smelters shut down.