Precious Metals Plunge Ahead of Union Budget 2026-27
Gold and silver prices experienced a dramatic decline on Sunday, hitting their lower circuit limits in futures trading as investors positioned themselves ahead of the Union Budget 2026-27 presentation. The significant drop comes after months of record-breaking gains for both precious metals, creating a volatile market environment.
Sharp Decline in Futures Trading
Gold futures for April 2, 2026, delivery plummeted by Rs 9,140, representing a substantial 6% decline, to settle at Rs 1,43,205 per 10 grams. Simultaneously, silver futures for March 5, 2026, delivery witnessed an equally sharp fall of Rs 17,515, also dropping 6%, to reach Rs 2,74,410 per kilogram.
This selloff follows Friday's historic crash, which marked the sharpest single-day falls for both silver and gold in recent memory. The Multi Commodity Exchange (MCX) remained operational on February 1 for a special Sunday session, anticipating Finance Minister Nirmala Sitharaman's presentation of the Union Budget 2026.
Market Capitalization Takes a Hit
According to data from Mirae Asset ShareKhan, the market capitalization of gold fell by nearly $3.5 trillion over the last two days, while silver shed approximately $1.5 trillion during the same period. This combined decline of $5 trillion represents a significant market correction.
Despite this recent plunge, it's important to note that gold has gained $3 trillion and silver $2 trillion since the beginning of the year. Over the past two years, international gold prices have risen by an impressive 150%, while silver has climbed an even more remarkable 326%.
Multiple Factors Driving the Correction
Market analysts point to several interconnected factors behind this sudden price correction. Investors rushing to book profits after months of substantial gains represents one primary driver. Additionally, a strengthening US dollar has exerted downward pressure on precious metal prices.
Maneesh Sharma, AVP - commodities & currencies at Anand Rathi Shares and Stock Brokers, explained to TOI: "Gold and silver, which peaked during overnight trading on Thursday, fell sharply after six of the Magnificent Seven equities related to AI stocks got hammered during the North American session."
He further elaborated: "On Wednesday, the US Federal Reserve maintained the status quo, keeping interest rates unchanged after revealing improvements in the labor market. Regarding inflation, they noted that it remains elevated and reiterated their data-dependent, meeting-by-meeting approach."
Political Speculation Adds Pressure
Speculation surrounding the US Federal Reserve's leadership has created additional market uncertainty. President Donald Trump's nomination of Kevin Warsh, known as an inflation hawk, surprised financial markets and contributed to the downward pressure on precious metals.
Sharma added: "The sharp moves in precious metals seen on Friday reflected speculation that Warsh may be less enthusiastic about cutting interest rates, given his past warnings about inflation risks and more recent calls for the Fed to reduce its balance sheet. This development led to a rise in the US dollar and yields, weighing on sentiment for the bullion complex."
Broader Market Impact
As precious metals continued their steep decline, MCX shares slipped by 10% to hit the lower circuit of Rs 2,145.25. This broader market reaction underscores the interconnected nature of commodity markets and financial instruments.
The dramatic price movements highlight the volatility that often precedes major economic announcements like the Union Budget. Investors remain cautious as they await policy directions that could significantly impact commodity markets, taxation structures, and overall economic sentiment in the coming fiscal year.
