Indian markets bore the brunt of the defeat. March MCX silver futures tumbled more than 8%, while MCX gold traded 1% weaker. The damage to the stock market was even greater as Axis Silver ETF collapsed by as much as 21%, Nippon India Silver ETF plunged by 13% and Nippon Gold BeES fell by 4%.
Here are 3 reasons why gold and silver prices are falling:
1) Dollar’s new life
The dollar roared back to a nearly two-week high on Thursday, making dollar-denominated gold more expensive for other currency holders and draining momentum from precious metals.
“The dollar got a new lease of life thanks to the Warsh nomination, and the currency has been able to continue to make progress… traders are now more cautious about gold in light of the recent extreme volatility,” said Tim Waterer, chief trading analyst at KCM.
Investors are recalibrating expectations around Kevin Warsh’s appointment as Fed chairman, pointing to his preference for a smaller Fed balance sheet and expectations that he would be less aggressive on rate cuts. The Federal Reserve’s hawkish signals have fueled expectations of a slower pace of US interest rate cuts, strengthening the dollar and putting pressure on non-yielding assets such as gold and silver.
2) The geopolitical heat is cooling
The easing of tensions on multiple fronts has further eroded bullion’s appeal as a safe haven. Iran and the U.S. agreed to hold talks in Oman on Friday, officials from both sides confirmed, potentially defusing nuclear tensions that had supported metals prices.
“If you take away geopolitical tensions and the de-dollarization trend for now… metals have little room to run,” said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.
3) Trump and Xi’s appeal dampens demand for safe havens
The sharper decline in bullion prices on Asian markets was partly caused by a phone call Wednesday between US President Donald Trump and Chinese President Xi Jinping. Trump said on Truth Social that the call was “all very positive,” that his relationship with Xi is “extremely good” and that “we both realize how important it is to keep it that way.” An official Chinese government report said Xi had said: “I attach great importance to Sino-US relations.”The leaders of the world’s two largest economies discussed Taiwan and a wide range of trade and security issues on their first call since November. Both leaders publicly reaffirmed their personal interest in strong relations, allaying concerns about escalating economic tensions that had previously driven demand for safe haven assets.
The combination of factors created “a feedback loop amid limited market liquidity,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. “Sentiment appears to have turned damp across most asset classes, including regional equities and metals.”
Should you buy the dip in gold and silver?
Despite the carnage, analysts remain divided on whether the correction represents a buying opportunity or a sign of deeper problems ahead.
Ponmudi R, CEO of Enrich Money, sees the sell-off as a healthy consolidation rather than a trend reversal. “COMEX Gold is trading near the $4,850-$5,000 zone, following a sharp correction from recent highs above $5,500-$5,600. The broader uptrend remains intact, with the pullback reflecting profit booking and healthy price processing,” he said. There is strong buying interest in the $4,700–$4,800 support band, and continued stability above this area could pave the way for renewed upside potential, with a break above $5,100–$5,200 opening the way to previous record highs.
On MCX Gold, Ponmudi noted, “MCX Gold futures are trading near the ₹1,49,000-₹1,55,000 zone, after a sharp correction from record highs around ₹1,80,000-₹1,81,000. While the earlier rally led to excess momentum and profit booking, the broader bullish structure remains intact.”
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On silver, he added, “Strong buying interest is evident in the support band of ₹2,35,000-₹2,50,000, in line with previous swing lows and longer-term structural support. A sustained hold above this base, followed by a decisive recovery, could see the upside momentum towards ₹3,00,000-₹3,25,000 in the coming periods Reviving declines toward support continue to provide accumulation opportunities for positional traders.”
However, Jigar Trivedi, Senior Research Analyst at Indusind Securities, struck a more cautious tone and said that despite hopes that dip buyers could intervene at lower levels, the decline in silver and other metals appears to be continuing after the recent recovery failed to hold. MCX Silver March prices are likely to drop to Rs. 235,000/kg amid weak trend in international markets.
Manoj Kumar Jain offered tactical guidance: “We recommend buying gold above 154000 with a stop loss below 151800 for the target of 156800-158500 and also buying silver above 270000 with a stop loss below 261100 for the target of 278000-284000.”
Analysts at Standard Chartered Plc, including Sudakshina Unnikrishnan, said gold prices are “likely to remain volatile until there is more certainty on the outlook for monetary policy.” Some of this near-term volatility may reflect investors buying back their holdings in exchange-traded products, they said, but “structural factors remain intact, and we continue to expect an upside rebuild.”
Trump added a wild card, saying in an NBC News interview that there was “not much” doubt that the Fed would cut rates again — a tailwind for precious metals, which pay no interest.
Also read: Silver plunges nearly 17% in Asian market, gold bursts 3.5% as precious metals erase recent gains
With gold and silver prices experiencing extreme volatility after roughly doubling in 12 months, investors face a treacherous landscape in which timing, risk management and asset allocation will prove crucial as they navigate the ongoing turbulence.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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