Gold and silver prices continued their sharp fall on Monday, deepening losses for investors who entered the market near recent highs. On the Multi Commodity Exchange (MCX), silver prices have dropped sharply from their record peak, while gold has also seen a strong correction.
As of around 3:20 pm, silver on MCX was trading at around Rs 2,48,400, down Rs 17,252 or nearly 6.5% in a single session. Gold was trading at around Rs 1,47,400, down Rs 353.
In just a few days, silver has become cheaper by close to Rs 2 lakh from its peak, while gold prices have fallen by more than Rs 51,000 from their recent highs.
Silver had earlier touched a record high of around Rs 4.20 lakh on MCX. It is now trading close to the Rs 2.50 lakh level, underlining the sharpness of the correction.
The fall has been driven by sustained selling pressure. Investors who bought during the rally, largely driven by fear of missing out, are now facing losses. The impact has been especially visible in gold and silver exchange-traded funds, which closely track the movement in the underlying metals.
WHY GOLD AND SILVER ETFS HAVE FALLEN SHARPLY
The recent fall is largely due to heavy profit booking after a strong rally. Even a small decline led to further selling, adding pressure on prices.
A stronger US dollar has also weighed on precious metals. Comments from US President Donald Trump added to uncertainty after he said he had chosen former Federal Reserve Governor Kevin Warsh, known for his hawkish stance on interest rates, to head the American central bank. Expectations of tighter monetary policy usually hurt gold and silver prices.
In addition, CME Group announced an increase in margin requirements for metal futures. COMEX gold futures margins have been raised from 6% to 8%, while margins for COMEX 5000 silver futures will rise from 11% to 15%.
These changes, effective after Monday’s market close, are expected to further affect sentiment in precious metals.
WHAT ANALYSTS ARE SAYING
Abhinav Tiwari, Research Analyst at Bonanza, said the recent “flash crash” in gold and silver should be seen as a cooling phase rather than a trend reversal.
“The recent flash crash in gold and silver, triggered by a hawkish US Fed nominee and increased margin requirements, is a necessary cooling of overbought markets rather than a trend reversal,” Tiwari said. He added that the long-term outlook remains positive despite volatility, supported by central bank buying, silver’s supply deficit, and ongoing geopolitical risks.
Siddharth Srivastava, Head of ETF Product and Fund Manager at Mirae Asset Investment Managers (India), said investors should reassess exposure after the sharp rally.
“We have maintained a cautious stance on silver following its parabolic move and have suggested trimming overallocation to precious metals to realign portfolios with long-term strategic allocation levels. While it is prudent to wait for further information and trend confirmation, we currently prefer gold from a relative risk-reward perspective,” he said.
WHY GOLD IS STILL A SAFE HAVEN
According to an investment guide on precious metals by Edelweiss Mutual Fund, gold continues to remain relevant due to several structural factors.
The guide notes that gold acts as a safe haven during financial and geopolitical stress, helps preserve purchasing power during periods of high inflation, and benefits from limited natural supply.
It also points to steady central bank buying as a key long-term support for gold prices. High liquidity is another factor, allowing investors to enter and exit positions even during volatile market conditions.
The Edelweiss investment guide highlights that gold plays a dual role in portfolios. During equity market downturns, gold has historically helped reduce downside risk. At the same time, it has also delivered returns during periods of market uncertainty, making it both a defensive asset and a long-term store of value.
This dual nature, the guide notes, explains why gold often behaves differently from equities and bonds, especially during market stress.
SOURCES OF DEMAND AND SUPPLY FOR SILVER
Silver’s price behaviour is more complex. According to the Edelweiss guide, nearly half of global silver demand comes from industrial use.
This includes electronics, solar panels, electric vehicles, and other new-age technologies.
On the supply side, the guide points out that silver production is largely dependent on mining activity, with limited scope for quick supply increases.
This imbalance between rising industrial demand and constrained supply can lead to sharp price movements in both directions.
WHY SILVER IS A POTENTIAL HIGH PERFORMER
The Edelweiss guide notes that silver often outperforms during strong precious metal rallies but is also more volatile than gold. Silver benefits from both investment demand and industrial consumption, which can amplify price moves during commodity upcycles.
However, the same factors can also result in steep corrections when sentiment turns cautious, as seen in the current phase.
DOLLAR CORRELATION AND ITS IMPACT ON PRICES
The Edelweiss investment guide also highlights the inverse relationship between precious metals and the US dollar. A stronger dollar typically puts pressure on gold and silver prices by making them more expensive for global buyers, while a weaker dollar tends to support prices.
Currency movements, the guide notes, remain a key factor investors need to track when investing in precious metals.
Market experts say investors should avoid panic reactions to sharp short-term price moves. Gold and silver ETFs are generally meant for medium- to long-term allocation rather than short-term trading.
Sharp corrections after strong rallies are common in commodity markets. Investors may consider reviewing their allocation, avoiding overexposure, and sticking to long-term strategies instead of chasing momentum. Staggered investing and periodic rebalancing can help manage volatility, particularly in assets like silver that tend to see sharp swings.
While near-term volatility may continue, analysts broadly agree that the current correction reflects a cooling of overheated prices rather than a breakdown of the long-term role of gold and silver in portfolios.
