Silver futures are legal contracts to buy or sell silver at a fixed price on afuture date. These are traded on exchanges like MCX (India) and COMEX (USA).
It allows investors to speculate on silver prices or hedge against price changes, without holding physical silver.
How Silver Futures Work
- You don’t buy silver right away—you agree to buy/sell later, at a price set today.
- Contracts are available in sizes like:
- 30 kg (standard)
- 5 kg (mini)
- 1 kg (micro)
Example: If you expect silver prices to rise, you can buy a silver future today and sell it at a profit later.
Key Benefits of Silver Futures
| Benefit | Why It’s Valuable |
|---|---|
| No need to store silver | Trade without buying physical metal |
| High liquidity | Easily buy/sell on exchanges like MCX or COMEX |
| Hedging tool | Protect against silver price volatility |
| Low margin required | Control large value with small investment |
| Transparent pricing | Based on global market trends |
Importance of Silver Futures
1. Speculation
Traders can profit from rising or falling prices using futures. It offers leverage for greater gains (but with risk).
2. Hedging
Jewellers or silver businesses use futures to lock in prices and avoid loss due to market swings.
3. Diversification
Silver is a precious metal and often seen as a safe-haven asset. Adding silver futures to your portfolio spreads risk.
4. Price Discovery
Futures trading helps determine the market price of silver, based on demand-supply and global factors.
Real Example
- Silver trades at ₹75,000/kg today
- You buy a 5 kg mini futures contract = ₹3,75,000 value
- Margin required ~₹40,000 (10%)
- If price rises to ₹76,000/kg, profit = ₹5,000 (₹1,000 × 5 kg)
- You can exit before expiry for profit/loss
Risks to Keep in Mind
- Leverage magnifies both profits and losses
- Prices can be volatile due to global events, USD rates, inflation
- Futures expire—positions must be settled or rolled over
Who Should Consider Silver Futures?
- Active traders looking to profit from price swings
- Businesses dealing in silver (jewellers, importers)
- Long-term investors seeking diversification in commodities
