Nithin Kamath, founder and CEO of Zerodha, sounded a sharp warning after global commodity markets witnessed an unusually severe meltdown that saw silver crash nearly 30% and gold fall around 15% in a single session, with several metals hitting their lower circuits-the maximum allowable daily decline.
In a detailed post on X, Kamath said the volatility was so extreme that it overwhelmed even robust risk-management systems, leaving some traders losing more than their entire initial margin. He described it as one of those rare occasions where neither traders nor brokers have any escape route when markets move faster than controls can respond.
He noted that all major metals hit lower circuits, underscoring the scale of the disruption, while natural gas, in contrast, hit its upper circuit on the same day – highlighting the unpredictability dominating the market.
As a broker, there are rare days when risk management simply doesn’t work, when markets move so violently that traders lose more than their entire initial margin. When this happens, both the trader and the broker are sitting ducks with no way out.
Yesterday was one of those days… pic.twitter.com/lkfeSleky9
— Nithin Kamath (@Nithin0dha) January 31, 2026
Kamath compared it to the 2020 Covid Pandemic period when crude oil prices briefly turned negative – the only other time in Zerodha’s 16-year history when markets behaved with similar intensity. However, he noted that this time the impact was broader, spanning multiple commodities simultaneously.
Kamath warned that such violent movements are not limited to commodities, adding that a similar collapse could occur in equities, recalling how markets behaved during the 2008 financial crisis. “What happened in commodities yesterday can happen in equities too; we saw it in 2008,” he said.
He reiterated that traders often underestimate leverage risk, stressing that years of gains can be erased in one extreme session when markets gap through circuits.
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Friday’s crash marked one of the steepest declines in precious metals in recent months. Silver futures plunged nearly 17% to Rs 3.32 lakh per kilogram, while gold futures dropped around 9% to Rs 1.54 lakh per 10 grams as investors rushed to book profits amid weak global cues and a stronger U.S. dollar.
Kamath’s cautionary note serves as a stark reminder of the latent risks in leveraged trading and the limits of technical safeguards when markets behave unpredictably. As commodity markets continue to digest the shock, both traders and brokers are likely to revisit their risk frameworks in light of his warning.
