The carnage marks MCX gold’s sharpest decline since March 15, 2013, when it fell over 9.69% intraday, and silver’s worst day since September 23, 2011, when it plunged over 17% intraday, according to data from Kotak Securities.
The Warsh Effect
The trigger for the crisis was US President Donald Trump’s decision to appoint Kevin Warsh, widely seen as an inflation hawk, as the next Fed chairman. Warsh has pushed for a smaller Fed balance sheet, in stark contrast to Trump’s tilt toward looser monetary policy, a prospect that strengthened the dollar and sent precious metals into freefall.
“Gold and silver prices fell sharply today as prices face headwinds from a recovery in the US dollar, a broader sell-off in global markets and reports that the Trump administration could appoint Kevin Warsh, widely seen as an inflation hawk, as the next Fed chairman,” said Kaynat Chainwala, AVP, Commodity Research at Kotak Securities.
Chainwala explained that this pullback follows a record recovery fueled by eroding confidence in the US dollar, exacerbated by President Trump’s criticism of the Federal Reserve, expansionary fiscal policy amid rising debt, unpredictable rates and fears of currency depreciation.
International markets reflect the carnage
On international markets, silver fell more than 15% to $98.07 an ounce, falling below the psychologically critical $100 mark, after falling on Thursday from a record high above $120 on the same day. Gold prices tumbled more than 7%, falling below the $5,000 mark, although the safe-haven metal remained on track for its biggest monthly gain since 1999 after hitting multiple record peaks. Gold hit a record high of $5,594.82 on Thursday and is still on track for a gain of more than 15% this month. “I still believe there are still some gold supports in place, but after the strong rally in recent weeks, some consolidation is healthy,” said UBS analyst Giovanni Staunovo, adding that “the likely appointment of a new Fed chairman will put immediate pressure on prices.”The U.S. dollar rose on Friday, reversing some of this week’s decline to a four-year low. A stronger US currency makes gold more expensive in dollars for foreign buyers.
Why silver crashed harder
Chainwala noted that “silver has corrected more sharply than gold, which is typical after outsized gains given higher volatility and exposure to industrial demand.”
She warned that “a sharp correction in the Nasdaq and the risk of a broader carry trade in the yen pose the biggest downside risks to the record gold and silver rally. Coupled with this, Trump and Senate Democrats reached a tentative deal to avoid a US government shutdown, weighing on port assets.”
Technical carnage and margin triggers
Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities warned that “such increased volatility is expected to continue for a few more sessions until positions normalize and buyer-seller equilibrium returns.” Technically, he expects CME gold to remain volatile in the $4,800-$5,200 range, with a continued break below $4,800, which could potentially open a downside towards $4,500. In MCX, gold is expected to fluctuate between ₹1,58,000 and ₹1,70,000.
Ravi Dharamshi, a leading PMS fund manager, sharply warned on social media platform
Rajkumar Subramanian of PL Wealth also warned investors about silver’s inherent risks: “Silver remains a volatile metal, with historical annualized volatility often in the 25-35% range, higher than gold, and the sharp run-up increases the risk of short-term corrections. From an investment perspective, we recommend calibrated, diversified allocations rather than a one-time commitment to manage entry risk while reducing exposure to silver’s long-term structural effects. preserved.” drivers.”
Hareesh V, Head of Commodity Research at Geojit Investments, noted that while “forecasts suggest that silver could continue its rally if supply remains tight and geopolitical risks remain high, especially as silver is now recognized as a strategic and industrially critical metal,” he warned that “silver has historically been highly volatile, and therefore a steep correction cannot be ruled out at any point.”
Hareesh identified several bearish catalysts: “Technical indicators show the market is overbought, raising the possibility of short-term corrections. A stabilization in geopolitics, a stronger US dollar, reduced risk aversion among investors or an improvement in mining production could also ease upward pressure on prices.”
Is this a healthy correction or the top?
Despite the brutal sell-off, most analysts view Friday’s crash as a healthy correction and not the end of the bull market. Chainwala maintained that “the medium-term outlook remains constructive amid ongoing geopolitical tensions, policy uncertainty and a structural shift towards hard assets from fiat currencies.”
However, with gold still on track for its biggest monthly gain since 1999 and silver posting a record monthly performance, the question remains whether Friday’s carnage marks a temporary lull or the start of a deeper correction. For investors who witnessed the vertical rally, the message from experts is clear: Manage risk, take profits and prepare for continued volatility as markets digest one of the most spectacular precious metals rallies in modern history.
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