Commodities Extend Losses, Spot Silver Plunges Over 3% Amid Market Volatility

Commodities markets faced renewed pressure on January 8 as spot silver fell more than 3% amid broader declines across the sector. London silver futures dropped to $75.50 per ounce, while New York COMEX silver fell over 3.00% to $75.26 per ounce. The decline marked a reversal from record highs seen in late December.

Global industrial metals also took a hit, with London nickel slipping 5% to $16,870 per ton and international copper futures sliding 4.00% intraday to 88,820.00 yuan per ton. The sharp moves reflected a combination of index-driven selling, tighter supply conditions, and investor caution following recent regulatory actions.

Precious metals equities were similarly affected. Hindustan Zinc Ltd. shares fell over 6% as silver prices on the Multi Commodity Exchange (MCX) dipped below ₹2.5 lakh per kilogram. The stock's decline was the steepest since June 2025 and came against a backdrop of historically high trading volumes and a 33% rise in the past 12 months.

Why Did This Happen?

The sell-off was largely driven by index rebalancing flows, which require passive funds to adjust their holdings in line with new weightings. Analysts at TD Securities noted that such rebalancing often triggers large-scale selling in commodities that have experienced strong gains.

Silver, which surged nearly 150% in the past year, faced particular pressure as funds adjusted their exposure. Citigroup estimated outflows of $6.8 billion from gold and silver futures contracts due to the rebalancing process.

At the same time, global supply constraints continued to weigh on the market. In London, tight supplies of silver and platinum—stemming from last year's U.S. import surge and lingering tariff concerns-have kept inventories low and borrowing costs elevated.

How Did Markets React?

The CME Group, one of the world's largest derivatives exchanges, has responded to the volatility by raising margin requirements for precious metals contracts. This measure, which limits leverage, has heightened caution among traders and raised questions about the sustainability of recent price gains.

The regulatory moves follow a week of sharp price swings, including a record high for silver above $82 per ounce on January 6, followed by a double-digit percentage drop. Analysts warned that the rapid rise had overextended expectations and created a speculative environment.

Geopolitical tensions added to the uncertainty. The U.S.'s potential expansion of control over Venezuelan oil and its ongoing Section 232 investigation into critical minerals imports kept traders cautious. According to reports, the U.S. seeks to expand control over Venezuelan oil. Meanwhile, China's new export controls to Japan further highlighted the fragile global trade environment.

What Are Analysts Watching Next?

Market participants are now turning their attention to a key set of U.S. economic data releases. The December jobs report, due on January 10, could shape expectations for Federal Reserve rate cuts. Fed Governor Stephen Miran has already signaled that the central bank may need to cut rates by more than a percentage point in 2026, with three rate cuts expected.

Precious metals typically benefit from rate cuts as they offer no yield and serve as a hedge against inflation. Gold, for instance, posted its best annual performance since 1979 in 2025, supported by central-bank buying and ETF inflows.

Looking ahead, investors will also monitor developments in the copper market, where demand is expected to grow 50% by 2040 due to AI and defense-sector expansion. However, S&P Global warned that without new mines and increased recycling, global supply could fall short by 10 million metric tons annually.

For now, the focus remains on the near-term volatility in the precious metals market. While long-term fundamentals remain bullish—particularly for silver's industrial applications—the recent sharp correction has underscored the risks of overextended speculative positions.