Silver prices tanked to Rs 70,790 per kg on February 2 as participants trimmed their positions as seen by the open interest. The precious metal had gained 9.3 percent on February 1 to touch $30.35/oz, the highest level since 2013 on the COMEX.

The white metal prices rallied 19 percent since January 27 largely on the back of buying frenzy in retail driven by social media recommendations to lap up silver mining stocks and ETFs. However, there is no fundamental development supporting the rally as gold has been rangebound and industrial metals struggling for direction.

Experts caution that the recent surge in silver is speculative in nature and may not continue for long.

The US Dollar Index traded lower at 90.84 levels, down 0.20 percent, in the afternoon trade.

Silver holdings in iShares ETF increased by 579.36 tonnes to 19,301.69 tonnes on increased inflow. The ETF holdings have jumped 1,649.92 tonnes in the last two days.

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MCX iCOMDEX Bullion Index dropped 304.41 points, or down 1.95 percent, at 15,329.63 at 14:52. The index tracks the real-time performance of MCX Gold and MCX Silver futures.

Sriram Iyer, Senior Research Analyst at Reliance Securities, said: “International silver prices are trading lower as investors booked profits this Tuesday morning and early afternoon trade in Asia. Additionally, in response to the rise in prices, CME Group Inc raised Comex 5000 Silver Futures margins by 17.9 percent to $16,500 per contract from $14,000 for February, which may have also seen retailers exit long positions and may have temporarily stopped retailers taking fresh long positions.”

Technically, LBMA Silver Spot is holding above $28 after giving a breakout of Rising Channel formation. However, it can see some sideways momentum below $28 levels where support is at $27.70-$27 levels. Resistance is at $29.40-$30.10 levels, Iyer noted.

In the futures market, silver for March delivery touched an intraday high of Rs 72,600 and a low of Rs 70,301 per kg on the MCX. So far in the current series, the precious metal has touched a low of Rs 54,386 and a high of Rs 79,980.

Silver delivery for March contract plummeted Rs 2,986, or 4.05 percent, to Rs 70,680 per kg at 14:56 hours with a business turnover of 13,852 lots. The same for the May contract declined Rs 2,942, or 3.93 percent, to Rs 74,800 per kg with a turnover of 1,237 lots.

The value of March and May’s contracts traded so far is Rs 3,556.86 crore and Rs 133.70 crore, respectively.

The spot gold/silver ratio currently stands at 66.73 to 1 indicating that gold has outperformed silver.

Iyer added that domestic silver prices are trading weak on Tuesday morning and early afternoon trade, tracking weak overseas prices. Technically, if MCX Silver March trades and closes below Rs 71,500 we could see a downside pressure up to Rs 69,900-67,500 levels whereas resistance is at Rs 73,000-74,700 levels.

In the domestic market, MCX Silver gained 5.7 percent on February 1, underperforming international market due to government decision to cut import duty. A cut in taxes makes domestic silver prices cheaper, however price trend may continue to be determined by the international trend, said Kotak Securities.