The Recent Shift in Gold and Silver Prices: A Closer Look
After a prolonged rally spurred by safe-haven demand amidst escalating global tensions, gold and silver prices are experiencing a sharp decline. This shift comes on the heels of both metals reaching record highs earlier this month—gold peaking at approximately $4,381 per ounce and silver at around $54.5 per ounce—only to correct by nearly 10% as investors pivot back to risk-on assets like equities.
Reasons Behind the Sudden Fall
Sugandha Sachdeva, Founder of SS WealthStreet, articulates that this correction is primarily a manifestation of profit-taking after the metals reached unprecedented prices.
“Profit booking in both gold and silver is evident as investors capitalize on recent highs. The US signaling progress on trade negotiations with China has diminished gold’s allure as a safe haven. Additionally, optimism regarding a resolution to the US government shutdown and a stronger dollar has further eroded demand for precious metals,” she explains.
Currently, gold prices have retreated significantly from their recent highs, which means market participants are eyeing support levels closely. Sachdeva identifies critical support around $39.50–$40.00 per ounce, translating to about ₹2,10,000 per 10 grams in the Indian market. As long as this support holds, a gradual recovery could be on the horizon, even though it will not be steep.
For silver, she anticipates a stable floor price near ₹1,45,000, while capping the upside at approximately ₹1,67,000 for the foreseeable future. She suggests that both metals might experience more sideways trading following a significant 65% appreciation in gold prices throughout this year.
Market Reaction and Outlook
As the dollar gains strength, gold prices continue their downward trajectory, with spot gold reported at $4,082.95 per ounce—a dip of 0.3%—while US gold futures for December delivery saw an increase of 0.8%, trending at $4,097.40 per ounce. The dollar index also rose by 0.1%, making gold more expensive for holders of other currencies.
In the domestic market, the price correction mirrors the global trend. Rahul Kalantri, VP of Commodities at Mehta Equities Ltd., elucidates that the decline primarily results from investors moving towards riskier assets amid renewed optimism over improved US–India trade relations and waning physical demand in India.
“Gold and silver prices stabilized around $4,050 and $48 per ounce after a sharp two-day fall. This retreat reflects optimism regarding potential breakthroughs in trade negotiations and an eagerness to assume higher risk,” Kalantri explains.
Despite the immediate downturn, both gold and silver retain significantly higher valuations than last year, bolstered by expectations of additional rate cuts from the US Federal Reserve coupled with ongoing economic uncertainties around the globe.
Kalantri provides detailed insights into the current support and resistance levels for gold and silver prices. For gold, he identifies support at $4,020–$3,975 with resistance at $4,125–$4,170. In terms of rupee valuations, gold support lies between ₹1,21,070 and ₹1,20,580, while resistance is at ₹1,22,350–₹1,23,000. On the silver front, support is noted at ₹1,44,350–₹1,43,450, with resistance anticipated at ₹1,46,850–₹1,47,780.
Is the Rally Over?
Experts are pondering whether this recent correction marks the end of the gold rally or just a temporary pause. This year, gold surged by over 65%, driven by factors such as geopolitical fears, economic slowdowns, and robust central bank buying. With easing tensions and a pivot back to equities, the safe-haven demand for gold has diminished.
Nonetheless, the long-term trajectory for gold remains bullish, especially if the US Federal Reserve implements anticipated interest rate cuts in the coming weeks. Sachdeva articulates a cautious optimism, stating, “We expect some recovery at lower levels, albeit gradual rather than explosive. The market will likely undergo a consolidation phase as it adjusts to these new dynamics.”
As investors keep a keen eye on upcoming inflation data and central bank policies, the coming weeks will be pivotal in determining whether gold and silver can stabilize or whether additional declines are on the horizon.
