Gold and silver prices are showing signs of recovery this week, but market analysts warn of impending volatility in the coming days. According to Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, the precious metals market remains on a rollercoaster ride, influenced by a complex mix of global factors.
Recent Price Movements and Market Dynamics
Spot gold climbed by 10–12% after hitting a low of $4404 this week, extending its slump from Friday, which marked the steepest decline in over a decade. Similarly, silver surged more than 20%, reclaiming levels above $87 per ounce after falling toward $73 in Monday's trading session. This recovery comes as dip-buyers flock to precious metals following an abrupt unwinding of a record-breaking rally.
Factors Driving the Volatility
The plunge in prices was triggered by multiple events. The CME Group's decision to hike margin requirements on both metals forced leveraged traders to liquidate positions, accelerating a wave of selling. Additionally, a month-end rout was sparked by the US dollar rebounding from its lows. This dollar strength followed reports that the Trump administration was preparing to nominate Kevin Warsh for Federal Reserve chair, a move later confirmed. Traders perceive Warsh as a tough inflation fighter among the finalists, raising expectations of monetary policies that could bolster the dollar and weaken greenback-priced bullion.
Earlier in January, gold's climb had been supported by renewed concerns over geopolitical upheaval, currency debasement, and threats to the Federal Reserve's independence. However, the recent nomination has spooked market sentiments, and while Warsh is not yet confirmed as Powell's successor, speculation over his policy stance continues to influence short-term market dynamics.
Gold and Silver Price Outlook for the Week
Markets remain sensitive, with position adjustments potentially creating selling pressure at higher levels. Despite this, fundamentals stay positive for a long-term perspective.
Weekly Predictions
- Spot Gold (CMP 4915/Oz): Expected to remain volatile with an upside test of $5020–5090 per ounce possible in the current week.
- Spot Silver (CMP 4915/Oz): Also volatile, with an upside test of $90–91 per ounce likely in the coming days.
Key Influencers: China Demand and Global Factors
Chinese markets have been trading at a notable premium over the LBMA, indicating strong demand and a lack of available silver in local markets since the start of the year. Recent data shows that China witnessed larger gold ETF inflows than the US last week, despite US holdings being roughly 7–8 times bigger. Wholesale jewellery demand has also risen in recent weeks amid Spring Festival restocking, likely amplified by the price dip, as reflected in soaring local gold premiums and stronger trading volumes on the Shanghai Gold Exchange.
With China entering Lunar New Year holidays starting February 17th, exchange volumes may be impacted in the coming weeks. Meanwhile, the dollar's rebound from its lows since Friday could keep gold prices on a turbulent path in the near term. Investors are also turning their attention to Friday's monthly jobs report, though its release might be delayed by a partial government shutdown.
Impact of Indian Rupee and Trade Deals
The Indian rupee has witnessed sharp appreciation following the announcement of a trade deal between India and the US. This could remain a factor limiting upside in local gold prices, as a stronger rupee makes imports cheaper, potentially capping domestic price gains.
Long-Term Prospects and Investment Insights
Despite short-term volatility, the long-term outlook for precious metals remains positive. Dips in gold toward $4650–4500 per ounce could reignite investment demand in the medium term. Given uncertainty around interest rate trajectories, continued central bank demand, and ETF flows, diversification of foreign US asset holdings into gold is expected to persist into 2026.
These factors could propel gold to test $6000 per ounce in the second half of the current year, driven by sustained investor interest and macroeconomic support. However, markets will closely monitor developments such as Fed policy decisions and global economic indicators to gauge future price movements.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
