Rajkot bullion crisis deepens as silver traders default on 3.5K Cr

Rajkot | Gujarat :   Rajkot’s once-thriving bullion market has been jolted by an unprecedented crisis as dozens of silver short traders have shut their shops, locked offices and disappeared from the market after being brutally caught in a historic silver rally. What began as aggressive short-selling on the belief that silver prices would not cross ₹1.25 lakh per kg has turned into a nightmare, with prices surging sharply and leaving traders unable to meet mounting settlement obligations.

According to a report in Rajkot-based Gujarat Mirror newspaper, at least 44 bullion trading firms in Rajkot have effectively collapsed, declaring their inability to settle dues as losses snowballed. “This is not a correction, this is a wipeout,” said a senior bullion trader, requesting anonymity. “Those who fought the trend are now paying the price. Many simply don’t have the liquidity to survive.”

The crisis deepened over the weekend when an emergency meeting of traders failed to produce a workable settlement. Even the payment of the traditional ‘Valan’ (price difference or margin) proved insufficient as silver prices reportedly surged towards ₹1.50 lakh per kg, expanding losses far beyond initial estimates. The total settlement exposure is pegged at an alarming ₹3,500 crore, with ripple effects extending to Ahmedabad, Indore and Dubai-linked trading networks.

Several bullion shops in Rajkot’s key trading hubs remained shuttered on Monday, fuelling panic and speculation. “Some traders have literally locked their shops overnight,” said a bullion association member. “Phones are switched off. Credit lines have frozen. Trust has collapsed.”

The fallout is no longer limited to the bullion trade. Sources say the liquidity crunch has spilled into real estate and private finance sectors, as funds diverted from property and lending businesses were used to plug silver losses. “Money meant for construction projects and financing is stuck in silver settlements,” said a local real estate developer. “This crisis has paralysed Rajkot’s business ecosystem.”

Market insiders also point to a visible shift, with real estate players and investors moving operations to Ahmedabad, citing fear of prolonged financial instability in Rajkot. “Confidence has taken a hit. Recovering from this will take years,” a financier said.

Veteran commodity analysts describe the episode as a textbook case of a short squeeze gone wrong. “Shorting a runaway bull market without strict risk management is financial suicide,” said a Ahmedabasd-based commodities expert. “Rajkot is witnessing the consequences in real time.”