Gold, Silver & Copper Drop Up to 13%: Four Key Factors Driving the Commodity Sell-Off

Gold, Silver and Copper Prices Slide Sharply After Strong Rally

Gold, silver and copper prices witnessed a sharp decline on December 29 after an extended bullish run. A mix of profit-booking, easing geopolitical tensions, policy developments in China, and tighter margin norms emerged as the key reasons behind the fall.

Gold Prices Ease from Record Highs

Gold futures for February delivery slipped nearly 2 percent after hovering close to lifetime highs, settling at ₹1,37,646 per 10 grams. Contracts with April and June expiries also declined by around 2 percent after touching fresh all-time highs earlier in the session.

Silver Sees Steep Correction

Silver prices corrected sharply, with March expiry futures falling about 8 percent to ₹2,32,663 per kilogram after hitting a new lifetime high. Contracts expiring in May and July erased all gains as well, dropping 9 percent and 10 percent respectively during the day.

Copper Retreats After Hitting New Peak

Copper futures for January delivery dropped nearly 13 percent to ₹1,211.05 per kilogram after touching a record high of ₹1,392.95 per kilogram. February and March contracts also slipped into negative territory after reaching fresh all-time highs earlier.

Key Reasons Behind the Fall

1. Profit Booking at Elevated Levels

Market experts believe the sharp correction was largely driven by profit-taking after the strong rally seen throughout 2025.
“After such an exceptional rally this year, similar returns may not sustain in 2026,” said Pranav Mer, Vice President – Commodity & Currency Research at JM Financial Services.
High prices encouraged investors to lock in profits, leading to selling pressure.

2. Easing Geopolitical Tensions

Sentiment in safe-haven metals weakened after reports of progress toward a possible peace deal between Russia and Ukraine. US President Donald Trump recently met Ukrainian President Volodymyr Zelenskyy, with both leaders indicating significant progress in negotiations.
The growing optimism around geopolitical stability reduced demand for safe-haven assets like gold and silver.

UBS analysts also warned that gold prices are trading at elevated levels and could face downside risks if the US Federal Reserve turns more hawkish or if ETF outflows increase.

3. China’s Export Policy Impact

China announced plans to tighten export controls on certain physical metals starting 2026, requiring companies to obtain export licenses until 2027.
This move raised concerns about global supply availability and increased volatility in metal prices.

Reacting to the development, Elon Musk posted on X, saying that restrictions could hurt industries dependent on silver. Analysts at Motilal Oswal noted that tighter export controls may strain global inventories already under pressure.

Navneet Damani, Head of Commodities Research at Motilal Oswal Financial Services, said the silver market has entered a structural phase driven by supply shortages, falling inventories, and policy-led constraints.

4. CME Margin Hike Adds Pressure

Silver prices were also impacted after CME Group announced a hike in initial margin requirements for March 2026 silver contracts, raising it from $20,000 to $25,000.
Traders who fail to maintain the required margins risk forced liquidation, which may have added to the selling pressure.

Impact on Metal Stocks

Following the sharp fall in metal prices, shares of Hindustan Zinc and Hindustan Copper also declined from their intraday highs.