Why are gold and silver falling after record highs? Here’s what experts say
Gold and silver prices have come under sharp pressure after rallying to record highs earlier this month. Both precious metals, which had been buoyed by safe-haven demand amid geopolitical tensions, are now witnessing a steep correction as investors shift focus back to riskier assets such as equities.
According to commentary across brokerages and market participants, the correction appears to be driven by a combination of profit booking, seasonal factors, easing global uncertainties, and a stronger U.S. dollar.
Gold and silver metals, which hit record highs earlier, have started to decline as investors book profits and shift back to assets such as equities. Analysts noted that both gold and silver corrected by nearly 10%, with gold prices falling from a recent peak of $4,381 per ounce and silver from $54.5 per ounce.
What is causing this crash?
Technical reversal and seasonal demand tapering
Tejas Shigrekhar, Chief Technical Research Analyst – Commodities and Currencies at Angel One Ltd., observed:
“Gold witnessed a sharp decline of 385 points (8.00%) from its recent peak, marking a potential trend reversal after reaching historically overbought levels.”He added that Monday’s close saw the “highest monthly Relative Strength Index (RSI) ever observed,” which signalled exhaustion in bullish momentum.Further insights from Shigrekhar indicate that technical indicators across “Gold ETFs, Spot, and Futures markets now reflect clear signs of reversal, with price action shifting from bullish to bearish.”
He noted that spot prices were trading near the $4,000 mark, and seasonal demand is expected to soften post-festive period, possibly leading to further downside in November and December.
Investor positioning has also seen a shift. According to him, “Traders have begun increasing their exposure to put options, positioning for continued weakness in the coming months.”
Influence of geopolitical and trade developments
The broader geopolitical context continues to shape market sentiment. A potential trade agreement between the U.S. and India that could reduce tariffs on Indian exports is also being tracked closely.
Analysts said the sudden drop in gold and silver is linked to easing geopolitical tensions, a stronger dollar, and signs that the US may move towards trade deals that reduce global uncertainty.
Meanwhile, geopolitical developments between the U.S., China, and Russia are also being watched, with upcoming meetings between President Donald Trump and Chinese President Xi Jinping expected to influence market behaviour.
On the ETF front, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, saw a decline in holdings to 1,052.37 metric tons on Wednesday, from 1,058.66 tons the previous day, indicating reduced institutional demand.
Dollar strength and global developments
In international markets, gold prices edged lower in early trade, influenced by a stronger U.S. dollar. Spot gold dipped by 0.3% to $4,082.95 per ounce, while December futures rose 0.8% to $4,097.40. The U.S. dollar index rose 0.1%, making gold “relatively more expensive for holders of other currencies and thereby dampening demand.”
Investor attention has now turned to the upcoming U.S. Consumer Price Index (CPI) report. The inflation data, which had been delayed due to a government shutdown, is expected to show “core inflation holding steady at 3.1% for September.”
Markets are also pricing in a 25-basis-point rate cut by the U.S. Federal Reserve. Analysts noted that “lower interest rates tend to favour gold, as they reduce the opportunity cost of holding the non-yielding asset.” Despite the recent pullback, gold prices had climbed nearly 56% this year to a record high of $4,381.21 per ounce.
Rahul Kalantri, VP Commodities at Mehta Equities, said that “Gold and silver prices stabilised around $4,050 and $48 per ounce after a sharp correction in the last two sessions as investors booked profits from Monday record highs.”
He added that the “pullback reflected a shift toward risk assets amid optimism over US–India trade relations, weakening gold’s safe-haven demand.”
Kalantri also noted that despite the short-term correction, “gold remains significantly higher for the year, buoyed by expectations of further Federal Reserve rate cuts and lingering global economic uncertainties.” On the domestic front, he observed that gold has support at Rs 1,21,070–1,20,580, while resistance is pegged at Rs 1,22,350–1,23,000.
Key levels for gold and silver
Support and resistance ranges for gold now indicate a more balanced outlook. As per Angel One’s analysis:
“Gold priced at $4,080 is expected to find support between $3,800 and $3,670, with resistance near $4,190. A sustained move above $4,260 could invalidate the bearish outlook.”
Domestically, gold traded at Rs 128,270 on the MCX, with support noted at Rs 121,000 and Rs 115,000, and resistance around Rs 130,200–Rs 134,500.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)