Trillions Evaporate as Precious Metals Plunge in Historic Crash
The global commodity markets witnessed a seismic shock on Friday as gold and silver prices collapsed dramatically, erasing trillions of dollars in market capitalization within just two trading sessions. This violent reversal came after months of relentless record-breaking rallies that had pushed both precious metals to unprecedented lifetime highs.
Staggering Losses in Domestic and International Markets
In Delhi's bullion markets, the carnage was particularly severe. Gold prices plummeted by a staggering Rs 14,000 per 10 grams, while silver prices tanked by Rs 20,000 per kilogram on Friday alone. This sharp decline followed Thursday's peak where gold had reached a fresh high of Rs 1,83,000 and silver had touched Rs 4,04,500.
The scale of the correction is breathtaking. Gold has declined nearly 10% from its record highs, while silver has slumped approximately 20%. On the Multi Commodity Exchange (MCX), late Friday trading saw gold futures for February delivery drop to Rs 1.5 lakh per 10 grams, and silver futures for March delivery crashed to Rs 3 lakh per kilogram, representing a decline of over Rs 1 lakh.
$5 Trillion Wiped Out in Global Market Cap
According to data from Mirae Asset ShareKhan, the market capitalization destruction has been monumental. In the last two days, gold's market cap has declined by approximately $3.50 trillion, while silver has lost around $1.50 trillion, resulting in a combined drop of $5 trillion. Despite this dramatic correction, gold's market cap remains up by about $3 trillion since the beginning of the year, with silver having gained approximately $2 trillion.
Remarkably, even after Friday's crash, gold prices have appreciated 150% over the last two years in international markets, while silver has gained an astonishing 326% during the same period.
Multiple Factors Behind the Sudden Collapse
Several converging elements triggered the precious metals' dramatic decline:
- Profit Booking After Sharp Rally: Prices had escalated too rapidly, making some correction inevitable as investors locked in profits.
- Heavy Liquidation of Long Positions: Analysts point to substantial unwinding of bullish bets as a primary driver of the downturn.
- Dollar Strength: A resurgent US dollar applied additional pressure on dollar-denominated commodities like gold and silver.
- Federal Reserve Appointment Jitters: President Donald Trump's nomination of Kevin Warsh for the Federal Reserve chairmanship created market anxiety. Warsh is known as an inflation hawk who has historically opposed accommodative monetary policies.
Expert Analysis of Market Dynamics
Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, explained to TOI: "Gold and silver, which peaked during Thursday's overnight trade, fell sharply after six of the Magnificent Seven AI-related equities were hammered during the North American session. The US Federal Reserve's decision to maintain status quo on interest rates, citing improvements in the labor market while acknowledging elevated inflation, also contributed to the sentiment shift."
Praveen Singh, Head of Commodities at Mirae Asset ShareKhan, highlighted the significance of the Fed nomination: "Warsh's selection came as a surprise, as Rick Rieder had been widely viewed as the frontrunner. Rieder's dovish stance aligned with President Trump's policy preferences, while Warsh represents a more hawkish approach that could mean fewer rate cuts."
Additional factors influencing the market include:
- Geopolitical De-escalation: Reduced tensions as Iran signaled willingness for dialogue with the United States.
- Upcoming Economic Data: Investor caution ahead of key US macroeconomic releases including ISM Manufacturing, ISM Services, and Non-Farm Payrolls data.
- Shanghai Futures Exchange Changes: The exchange's decision to widen trading limits for some silver futures contracts could impact price sentiment in Monday's trading.
Short-Term Outlook and Technical Perspectives
Market participants are now looking toward several upcoming catalysts:
- US labor market reports that could indicate weakening employment conditions
- India's Union Budget announcement on Sunday, particularly any changes to import duty structures that directly affect MCX prices
- Technical support levels around $95.10 per ounce for silver and trading ranges of $4,780-$5,260 for gold over the next 1-2 weeks
Maneesh Sharma anticipates continued volatility: "On MCX, strong support for silver exists in the range of Rs 3,04,000 to Rs 2,92,000 per kilogram. We expect prices to stabilize within the next 2-3 weeks, with consolidation likely in the second half of the current quarter."
Long-Term Bullish Thesis Remains Intact
Despite the dramatic correction, experts maintain a fundamentally bullish outlook for precious metals:
Maneesh Sharma remains optimistic: "The sharp run-up in prices this month was due for correction, but that doesn't mean the bull run is over. We expect prices to hit new highs in Q2-Q4, with gold potentially crossing $6,000 per ounce in the second half of 2026 and silver reaching $130-$135."
Goldman Sachs echoes this sentiment: Anshul Sehgal, global co-head of Fixed Income, Currency and Commodities at Goldman Sachs Global Banking & Markets, believes the rally has further room: "The main driver has been global central banks shifting from the US dollar to precious metals. These are tiny markets compared to global stocks or fixed income, so the smallest change in demand creates parabolic price movements."
Praveen Singh identifies structural drivers: Persistent fiscal concerns, heightened geopolitical instability, rising global fragmentation, eroding trust in the US dollar, unsustainable US fiscal trajectory, and bond market fragility continue to support the long-term bullish case for both metals.
Investment Implications and Year-End Projections
For investors navigating this volatility, experts suggest:
- Recognizing that short-term corrections are normal in any asset class
- Focusing on the powerful structural drivers supporting precious metals
- Considering silver's additional upside from record industrial demand amid supply constraints, particularly in green energy transition applications
Praveen Singh projects year-end targets of $6,000-$6,500 for gold and $150 for silver. In rupee terms, this translates to approximately Rs 200,000 for gold and Rs 500,000 for silver.
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.
