Silver Price Correction Triggers Selling in Metal and ETF Space
Shares of Hindustan Zinc fell around 2 percent on December 31 as silver prices witnessed a sharp correction after a historic rally, triggering profit booking across silver-linked stocks and exchange-traded funds (ETFs). The decline in silver, which had emerged as one of the best-performing commodities of 2025, weighed on investor sentiment in companies and instruments closely tied to the white metal.
In early trade, shares of Hindustan Zinc, a Vedanta Group company and India’s largest silver producer, slipped to around Rs 611.05, retreating from recent highs. The stock had delivered strong gains in recent weeks, largely tracking the surge in silver prices.
A commodities analyst said, “After such a steep run-up, a sharp pullback in silver was always on the cards. Stocks linked to silver are reacting to the sudden change in momentum.”
Silver Futures Tumble Sharply After Hitting Record Highs
Silver prices declined sharply across contracts on the Multi Commodity Exchange of India (MCX). Silver futures with March expiry dropped more than 7 percent to around Rs 2,32,228 per kilogram, while May expiry contracts fell nearly 8 percent to about Rs 2,35,512 per kilogram.
The correction came after silver had scaled fresh record highs following an extended bull run, driven by a mix of industrial demand, investment flows, and global uncertainty. Market participants attributed Wednesday’s sharp fall largely to profit booking, as traders locked in gains after the metal’s extraordinary rise over the past year.
In addition, optimism around a potential US-brokered peace deal between Russia and Ukraine may have eased geopolitical tensions, reducing demand for safe-haven assets such as precious metals.
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Profit Booking and Easing Geopolitical Fears Weigh on Silver
Silver’s rally in 2025 was fuelled by a combination of factors, including lower global interest rates, strong demand from the solar and electronics sectors, and heightened geopolitical risks. However, as prices surged to record levels, valuations became stretched, making the metal vulnerable to sharp corrections.
Market experts believe the current fall does not necessarily signal the end of the silver bull cycle but reflects a healthy consolidation phase.
“Silver has moved up too fast in a short span. Some cooling off was inevitable,” said a commodities strategist. “The correction is also coinciding with easing geopolitical concerns, which typically takes some pressure off safe-haven assets.”
Hindustan Zinc Shares React to Silver Price Volatility
The sharp fall in silver prices had a direct impact on Hindustan Zinc’s share price. The company is the largest producer of silver in India and produces refined silver with a minimum purity of 99.9 percent, making its earnings sensitive to movements in silver prices.
While the stock declined in Wednesday’s session, its broader performance remains strong. Hindustan Zinc shares have surged nearly 27 percent over the past one month and are up more than 38 percent in 2025 so far. The recent rally in the stock was largely driven by the surge in silver prices, which boosted earnings expectations and investor interest.
At current levels, Hindustan Zinc trades at a price-to-earnings (P/E) ratio of around 26 and has a market capitalisation of over Rs 2.60 lakh crore, reflecting its status as a heavyweight in the metals space.
Silver ETFs See Broad-Based Declines Amid Price Correction
The sharp correction in silver prices also led to visible weakness across silver exchange-traded funds. Several silver ETFs declined between 1 and 2 percent, mirroring the fall in the underlying commodity.
Among the notable losers:
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Aditya Birla Silver ETF and Axis Silver ETF fell more than 2 percent each
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Nippon India Silver ETF, Groww Silver ETF, HDFC Silver ETF, Mirae Asset Silver ETF, and Kotak Silver ETF declined close to 2 percent
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Zerodha Silver ETF, ICICI Prudential Silver ETF, and Edelweiss Silver ETF slipped around 1 percent
The decline reflects near-term outflows and profit booking by investors who had entered silver ETFs during the rally.
Long-Term Silver Outlook Remains Intact, Say Analysts
Despite the sharp fall, analysts caution against reading too much into a single-session decline. Many believe silver’s long-term fundamentals remain supportive, given its dual role as both a precious metal and a key industrial input.
Structural demand from renewable energy, electric vehicles, electronics, and defence applications continues to provide a strong base. At the same time, supply constraints and slow mine expansion could keep the market tight over the medium term.
“Corrections like these are part of any bull market,” said a metals analyst. “The key question is whether prices stabilise at higher levels, which would still be positive for producers like Hindustan Zinc.”
What Investors Should Watch Going Ahead
Investors tracking silver-linked stocks and ETFs are expected to closely monitor global cues, including:
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Developments on geopolitical fronts
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US interest rate expectations and dollar movement
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ETF flows and positioning data
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Industrial demand trends, particularly from solar and manufacturing
In the near term, volatility is likely to remain elevated after the steep rally and subsequent correction. However, long-term investors may view such pullbacks as opportunities to reassess positions rather than exit in haste.
Investor Takeaway: Short-Term Pain After Strong Run-Up
The fall in Hindustan Zinc shares and silver ETFs highlights the risks of sharp corrections following steep rallies. While the immediate reaction reflects profit booking and easing safe-haven demand, the broader trend for silver and silver producers remains supported by strong structural drivers.
As one market participant summed it up, “Silver hasn’t lost its story overnight. What we are seeing is a reset after an exceptional run.”
For investors, the focus now shifts to whether silver prices find a stable base—and how quickly sentiment recovers after one of the most dramatic rallies in the commodity’s recent history.
