Silver prices erase all 2026 gains to plunge Rs 2 lakh from January peak. Perfect time to buy?

Silver’s eye-popping rally has come to an abrupt halt. After emerging as one of 2025’s top-performing assets with gains of as much as 170%, and extending that surge by another 74% in January 2026, the white metal has sharply reversed course.

Now trading below its 2025 closing level (at Rs 2.38 lakh, down from Rs 2.41 lakh), silver has wiped out all of its gains for the year. The sudden downturn has caught both long-term and short-term investors off guard, triggering a rush to cut risk and move toward safer positions.

What stands out most is the speed and scale of the fall. May silver futures have plunged 46% from their record high of Rs 4.39 lakh per kilogram to below the Rs 2.40 lakh mark in just three months. In absolute terms, that represents a sharp erosion of Rs 2,00,554, underlining the intensity of the selloff.

But why is this happening?

There are three broad reasons behind the sharp correction. First is the West Asia crisis. Gold and silver are typically viewed as safe-haven assets during periods of uncertainty, yet this time both metals have moved lower even as investors deal with rising geopolitical tensions and the war unfolding in West Asia.

The sharp rise in crude oil prices and escalating geopolitical tensions initially triggered a broad risk-off mood in financial markets. This pushed investors to raise cash and trim leveraged positions across asset classes. In such situations, even traditional safe-haven assets like gold can witness short-term selling pressure as investors liquidate holdings to meet margin calls or rebalance portfolios.

Second, a stronger U.S. dollar and a hawkish Federal Reserve have reduced the appeal of non-yielding assets such as silver. Since silver is priced in dollars, a stronger U.S. currency makes the metal more expensive for holders of other currencies, thereby reducing both investment demand and physical demand.

Third, profit-booking after an overstretched rally has accelerated the downside move. As volatility increased following the escalation of the Middle East conflict, traders preferred to lock in gains rather than continue chasing the rally. This led to a wave of selling instead of the usual safe-haven buying that markets often expect during geopolitical uncertainty.

Is this the right time to buy?

“We reiterate investing in silver over supportive fundamentals and market uncertainties. Any decline in prices over dollar rally or ease in tensions provides an opportunity to accumulate or invest in silver,” Tata Mutual Fund said in a report.

The report added that corrections after a sharp and extended rally are natural and do not weaken the long-term bullish outlook for precious metals. In silver’s case, the structural fundamentals remain firmly in place despite the recent pullback.

A major driver continues to be strong and rising industrial demand, which accounts for more than 60% of total silver consumption. Growing usage across multiple sectors, along with steady investment demand from China, is expected to keep prices supported at elevated levels over the medium to long term.

At the same time, supply conditions remain tight. Silver has been in a supply deficit for five consecutive years and has now entered its sixth year of structural shortfall. Export restrictions and declining inventories on the Shanghai Futures Exchange, which are currently near decade lows, highlight the strain on physical availability.

This persistent imbalance between demand and supply remains a significant positive for market sentiment and continues to support a constructive long-term outlook for silver prices.

Ponmudi R, CEO of Enrich Money, echoed a similar view and said that despite geopolitical tensions and elevated crude prices, silver remains more of an industrial metal than a defensive asset. He advised investors to avoid aggressive fresh buying and instead adopt a staggered accumulation strategy near strong support zones with a medium- to long-term investment horizon.

Technical view

From a technical perspective, MCX Silver is currently trading near the Rs 2,45,200 zone after breaking above the key Rs 2,44,400 resistance and moving past the recent consolidation range. Immediate resistance is placed at Rs 2,46,000, and a sustained move above this level could trigger fresh buying toward the Rs 2,47,000-Rs 2,48,000 range.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)