In a stunning turn of events, the prices of gold and silver have plummeted dramatically, following an impressive rally that saw them reach all-time highs just days prior. Analysts are predicting that while we may see ongoing short-term corrections, the underlying factors that support a bullish long-term outlook remain firmly intact.
The recent downturn in gold and silver prices can be attributed to rampant profit-taking activities, coupled with a stronger U.S. dollar. This volatility was exacerbated by U.S. President Donald Trump's announcement regarding his selection of former Federal Reserve Governor Kevin Warsh as the new head of the Federal Reserve. Warsh is known for his hawkish stance on monetary policy, particularly concerning interest rates, which heightens concerns about potential tighter financial conditions ahead.
To break down the numbers: on Friday, gold futures set for April delivery on the Multi Commodity Exchange (MCX) fell nearly 9 percent, reaching a low of Rs 1,67,406 per 10 grams. This sharp decline occurred just one day after these contracts had achieved a record high of Rs 1,93,096 per 10 grams, signifying a staggering drop of 13 percent—equivalent to Rs 25,690—in a single day. Meanwhile, silver futures for March delivery experienced an even more severe drop, falling close to 17 percent to Rs 3,32,002 per kilogram, after hitting a peak of Rs 4,20,048 per kilogram, marking an overall decrease of nearly 21 percent.
On the global stage, the spot price of silver on the COMEX market witnessed a drastic decline of around 30 percent over two days, closing at $85.250 per ounce, while gold’s spot price fell approximately 13 percent to settle at $4,879.60 per ounce.
This turbulence also reflected in gold and silver exchange-traded funds (ETFs), which mirrored the sharp declines, plunging as much as 24 percent following their previous highs.
Looking forward, Nikunj Saraf, CEO of Choice Wealth, explained that the steep drop in gold and silver ETFs can be easily understood as a classic reaction of profit-taking triggered by the record highs observed on Thursday at MCX. He noted that "a hawkish nominee for Fed chair under President Trump ignited global apprehensions regarding stricter monetary policies, thereby bolstering the U.S. dollar and driving down the previously overvalued metals."
Saraf emphasized that this dip serves as a crucial test for investors’ convictions, advising them to diversify their portfolios and resist the urge to panic sell while waiting for potential rebounds driven by demand from central banks. "Long-term bullish investors should remain steadfast," he encouraged.
Over the past year, silver has demonstrated an impressive rally, fueled by a combination of safe-haven demand, tight supply, and increasing industrial use in sectors like solar energy, electronics, and manufacturing—elements crucial to the growth narrative in India, as highlighted by Rajkumar Subramanian, Head of Product & Family Office at PL Wealth.
However, Subramanian cautioned that silver is inherently volatile, with historical annualized volatility often ranging between 25–35 percent, surpassing gold's fluctuations. The recent surge in prices raises the likelihood of imminent corrections, according to analysts.
"From an investment standpoint, we advocate for strategic, staggered investments instead of a lump-sum approach to mitigate entry-point risks while maintaining exposure to silver’s long-term structural trends," Subramanian advised.
Hareesh V, Head of Commodity Research at Geojit Investments, added that technical indicators suggest that the precious metals market is currently overbought, increasing the chances of short-term corrections. He noted that stabilizing geopolitical conditions, a stronger U.S. dollar, reduced investor risk aversion, or improved mining outputs could alleviate some of the upward pressure on prices moving forward.
Stay tuned for live updates from the stock markets as the situation unfolds!
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