Gold and Silver Prices Experience Dramatic Plunge: Is the Bull Run Over?
The precious metals market has been rocked by significant declines, with both gold and silver prices crashing sharply over the last two trading sessions. This dramatic reversal from recent record highs has raised serious questions about whether the bull run in bullion markets has concluded and whether increased volatility will become the new normal.
Silver Prices in Free Fall: A Staggering Decline
Silver has experienced particularly severe losses, with prices dropping by a staggering Rs 26,273 per kilogram, representing a decline of approximately 9%. This has dragged the metal down to around Rs 2.65 lakh per kg. On the Multi Commodity Exchange (MCX), silver futures for March delivery crashed by Rs 26,273, hitting the lower circuit limit and settling at Rs 2,65,652 per kg.
In the previous trading session, the metal had already suffered a steep fall of Rs 1,07,968, or 27%, closing at Rs 2,91,925 per kg. Cumulatively over the last two sessions, silver has declined by Rs 1,34,241, translating into a substantial fall of 33.6%. On a weekly basis, the metal has dropped by nearly 21%, or Rs 69,047, from its level of Rs 3,34,699 per kg recorded on January 23.
Gold Remains Highly Volatile Amid Correction
Gold futures have also displayed extreme volatility during Sunday's special trading session. The April contract initially slid as much as 9% to Rs 1,38,634 per 10 grams, hitting the lower circuit on the MCX in early deals. Prices later recovered part of the losses to settle at Rs 1,48,104 per 10 grams, still down Rs 4,241, or 3%, for the day.
In the previous session on Friday, gold had plunged Rs 31,617, or 17.2%, to Rs 1,52,345 per 10 grams. This followed the metal touching a record high of Rs 1,93,096 per 10 grams on Thursday. Overall, gold has declined about 20% from its recent peak in the domestic market.
Expert Analysis: Overspeeding Leads to Crash
Commenting on the sharp correction, Pranav Mer, Vice President of EBG – Commodity & Currency Research at JM Financial Services Ltd, offered a vivid analogy: "Overspeeding leads to a crash and that's what we saw in Bullion prices." He noted that selling pressure continued on Sunday, with silver falling nearly 37% from its record high.
Mer explained that profit booking and long liquidation were evident ahead of the near-month futures expiry in both international and domestic markets. He also highlighted that global commodity exchanges have raised margin requirements for gold and silver, a move that could potentially increase price volatility in the coming sessions.
Global Market Context and Contributing Factors
While global futures markets were shut on Sunday due to a holiday, the previous session witnessed even sharper losses in international bullion markets compared with domestic ones. On Friday, Comex gold futures for April delivery slid by $612, or 11.39%, to settle at $4,763.10 per ounce. This followed the metal touching a new lifetime high of $5,626.8 per ounce on Thursday.
Silver futures on the Comex for March delivery also experienced a steep fall, plunging $35.89, or 31.37%, to close at $78.53 per ounce on Friday. This came after the metal had scaled a record high of $121.78 per ounce just a day earlier.
Market analysts have attributed the sharp correction in bullion prices to several key factors:
- A firmer US dollar following comments by Federal Reserve Chair Jerome Powell that suggested interest rate cuts were unlikely in the near term
- Profit-taking by investors after the recent surge to record levels
- Increased margin requirements on commodity exchanges
- Political developments including US President Donald Trump's nomination of former Federal Reserve Governor Kevin Warsh as his nominee for the next Fed Chair
Market Outlook: More Correction Expected Before Recovery
Looking ahead, market experts anticipate further corrective moves in the precious metals space. "We may see more corrective moves in the next couple of trading sessions, after which prices may see some recovery and consolidate," Mer predicted. This suggests that while the immediate future may bring additional volatility, some stabilization could follow the current correction phase.
The dramatic price movements in both gold and silver have highlighted the inherent volatility in commodity markets, particularly following extended periods of rapid appreciation. Investors and market participants will be closely monitoring several factors in the coming days, including Federal Reserve policy signals, currency movements, and global economic indicators that could influence precious metals pricing.
