gold Silver
Heavy selling was seen in precious metals on Thursday. In Asian markets, silver fell by about 17%, while in India gold-silver ETFs fell by a huge 21%. Due to the strengthening of the dollar and reduction in geopolitical tensions, the rally that had been going on for the last several months suddenly broke.
Spot silver fell by 17% on Thursday morning. Just a few hours ago it had gone above $90 an ounce in Asian trading. It has now fallen by more than one-third from the all-time high made on January 29. Gold also slipped by more than 3%. On Monday it had gone below $4,500, whereas last week it was around $5,600.
The impact was more visible on Indian markets. March silver futures on MCX fell by more than 8%, while MCX gold remained weak by about 1%. The loss in the stock market was even deeper. Axis Silver ETF fell 21%, Nippon India Silver ETF fell 13% and Nippon Gold BeES lost 4%.
3 big reasons for the fall of gold and silver
1) Dollar strong again
On Thursday, the dollar reached its highest level in almost two weeks. Due to this, gold and silver priced in dollars became expensive for investors of other countries and the demand weakened. According to Tim Waterer, Chief Trade Analyst of KCM, the dollar has got new strength due to the nomination of Kevin Wersh for the post of Fed Chair. The market feels that he may take a tough stance on cutting interest rates. This strengthened the dollar and increased pressure on non-interest bearing assets like gold and silver.
2) Less geopolitical tension
Tension has reduced somewhat after Iran and America agreed on talks in Oman. Due to this, the demand for safe haven i.e. safe investment of gold and silver also decreased. According to Kunal Shah of Nirmal Bang Commodities, when the talk of geopolitical tensions and de-dollarization cools down, the scope for growth in metals also reduces.
3) Trump-Xi Jinping conversation
The positive phone conversation between US President Donald Trump and Chinese President Xi Jinping also reduced the demand for safe investments. Both the leaders emphasized the importance of relations and discussed issues like trade and security. This indicated reduction in global tension. According to OCBC strategist Christopher Wong, all this is creating a feedback loop in a low liquidity market, which weakened sentiment in stocks and metals.
Is it right to buy gold and silver in fall?
Even after such a huge decline, experts’ opinions are divided. Ponmudi R, CEO of Enrich Money, believes that this decline is not a sign of changing trend but a sign of healthy consolidation. He says that long-term bullishness is still there in gold and there is strong support around $4,7004,800. The structure of MCX Gold is also said to be strong. For silver, he says that the level of Rs 2,35,0002,50,000 is a strong support and buying opportunities can be found gradually from here.
At the same time, Jigar Trivedi of IndusInd Securities is more cautious. According to him, the fall in silver may continue further and MCX silver may go up to Rs 2,35,000 per kg. Manoj Kumar Jain gave clear levels for trading and advised to buy gold above Rs 1,54,000 and silver above Rs 2,70,000, with stop loss. Analysts at Standard Chartered say that until a clear picture regarding monetary policy comes, gold will remain volatile. However, the long-term bullish reasons are still strong. Overall, gold and silver are in a very volatile period after their prices have doubled in the last 12 months. In such a situation, right timing, risk management and balanced investment has become very important for investors.