Gold and Silver Prices Experience Significant Drop
Last week, gold and silver prices took a nosedive after reaching record highs. Analysts believe that while the short-term correction may persist, long-term structural factors are likely still intact.
The sharp decline in these precious metals resulted from extensive profit-taking alongside a robust dollar. Adding to the mix, US President Donald Trump announced his appointment of Kevin Warsh, the former Federal Reserve chair, known for his tough stance on interest rate cuts, to lead the US central bank.
On Friday, gold and silver prices fell dramatically.
MCX gold futures for April saw a decline of approximately 9 percent, dropping to Rs 1,67,406 per 10 grams—a fall that followed the contract’s peak of Rs 1,93,096 per 10 grams just a day prior. This represents a 13% decrease (Rs 25,690 per 10 grams) within a single day.
Meanwhile, silver futures due in March plummeted nearly 17 percent to Rs 3,32,002 per kg, marking a staggering 21 percent drop (Rs 88,046 per kg) after reaching a record high of Rs 4,20,048 per kg.
On the global front, COMEX spot silver prices witnessed a nearly 30% decline over two days, closing Friday at $85.250 per ounce. Spot gold fell around 13% during the same timeframe, closing at $4,879.60 per ounce.
Consequently, gold and silver exchange-traded funds (ETFs) mirrored the selloff, experiencing a decline of up to 24% following their earlier surge.
Looking Ahead
Nikunj Saraf, CEO of Choice Wealth, remarked that the steep drop in gold and silver ETFs was expected, as profit-taking typically follows an all-time high. He pointed out that the appointment of a hawkish Fed chair under Trump has triggered global worries about tighter policies, contributing to a strong US dollar and a significant fall in overbought metals.
For investors, this sell-off poses a challenge to their confidence. Saraf advised against panic selling, suggesting that diversifying investments while keeping an eye on potential rebounds driven by central bank demand is wise. He noted that “long-term bulls are solid.”
Silver had enjoyed a notable rally over the past year, driven by safe haven demand, limited supply, and increasing industrial consumption, especially in solar energy and electronics—key aspects of India’s growth narrative, according to Rajkumar Subramanian, Head of Product & Family Office at PL Wealth.
That said, silver tends to be more volatile, with annual fluctuations often between 25-35 percent, surpassing gold’s volatility. Analysts caution that the recent sharp increases could lead to a short-term correction.
Looking at investment strategies, a phased allocation—rather than a lump sum—may help manage entry point risks and still take advantage of silver’s long-term growth potential, one analyst suggested.
Furthermore, technical indicators suggest that the market for precious metals is currently overbought, heightening the chances of a short-term correction. Factors such as stabilizing geopolitical conditions, a stronger dollar, reduced risk aversion, and improved mining output could alleviate upward price pressures.
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