Gold and Silver Prices Stage Recovery After Recent Plunge
Following two consecutive sessions of sharp selling on Friday and Monday, gold and silver prices have been on an upward trajectory over the last two trading days. Both precious metals extended their Tuesday gains in domestic and international markets, marking a notable rebound from recent lows.
Current Market Levels and Gold-Silver Ratio Dynamics
The COMEX gold rate today successfully reclaimed the psychological $5,000 per ounce mark and has been sustaining above this level since morning trading began. Similarly, the COMEX silver rate today opened on an upside note and has been holding firm above the $85 per ounce threshold. This price action has brought the gold-silver ratio down to approximately 58, a significant drop from the record level of 42 observed on Monday.
NS Ramaswamy, Head of Research at Ventura Securities, explained the implications of this ratio shift: "Silver and gold could witness continued upside rallies, but these gold-silver ratio levels serve as a pivot point to rotate holdings from silver into gold, as gold is relatively cheaper when compared at GSR levels of 60 or below. The 'mean reversion' expected the ratio to rise again from 42 levels, which indeed happened. The outcome was with a sacrifice of Silver's price crash, and now it's time for Gold to outperform Silver in the coming months."
What Triggered the Recent Precious Metals Sell-Off?
Kaynat Chainwala, AVP — Commodity Research at Kotak Securities, highlighted the factors behind last week's dramatic decline: "Spot gold plunged more than 4.5% on Tuesday, closing below $4,700/oz, while silver tumbled around 7% to settle near $79.3. The selloff extended losses from last Friday, driven by a rebound in the U.S. dollar and a shift toward a more hawkish Federal Reserve outlook following the nomination of Kevin Warsh, widely viewed as an inflation hawk, as the next Fed Chair."
The Kotak Securities expert noted that additional pressure emerged from firmer US Treasury yields after surprisingly positive US manufacturing data. The ISM manufacturing index jumped to 52.6 in January from 47.9, returning to expansion territory after 26 consecutive months of contraction. This stronger economic data prompted traders to scale back expectations for Federal Reserve rate cuts this year.
"The selloff was exacerbated by higher margin requirements and growing expectations that policy easing will be delayed until Jerome Powell's term ends in May, with a perceived hawkish candidate set to take the helm," Chainwala added.
Factors Fueling the Current Precious Metals Rally
Rahul Kalantri, VP Commodities at Mehta Equities, identified several drivers behind today's price recovery: "Gold and silver prices today rebounded from their recent lows, climbing back above $5,000 and $87 respectively, after two consecutive sessions of sharp selling. Markets have largely absorbed the nomination of Kevin Warsh as the new Fed Chairman. Safe-haven buying strengthened amid rising geopolitical tensions, after U.S. forces shot down an Iranian drone, although diplomatic talks are still expected to continue. Support also came from a partial US government shutdown and profit-taking in the dollar index from its highs. However, a firmer rupee capped gains for precious metals in domestic markets."
Key Technical Levels for Gold and Silver
Kalantri provided crucial support and resistance levels for traders to monitor:
- Gold rate today has support at $4,855 and $4,775 per ounce, while resistance stands at $5,060 and $5,150
- Silver rate today has support at $79.80 and $74.75, with resistance at $89.15 and $94.80
- In Indian rupees, gold rate today has support at ₹1,47,650 to ₹1,45,310 per 10 grams, while resistance is at ₹1,52,850 and ₹1,55,950
- Silver rate today in INR has support at ₹2,59,810 and ₹2,52,170, with resistance at ₹2,74,810 and ₹2,80,470
Will the Precious Metals Rally Sustain?
Amit Goel, Chief Global Strategist at PACE 360, offered a cautious perspective on the sustainability of this rebound: "I personally believe that gold and silver prices have topped out last Friday morning when both the precious metals climbed to a new peak before sharp selling triggered. However, if gold rates today or in the coming one to two sessions break above $5,400 per ounce on a closing basis, we can expect the precious yellow metal to climb to a new peak. Likewise, if the silver rate today or in the next one to two sessions breaks above $95 per ounce mark on a closing basis, then we can expect the precious white metal to hit a new peak, provided it remains above $95 per ounce levels without coming below this psychological mark."
When asked whether breaking above these resistance levels would signal a sustained rally, Goel responded: "This rally is short-lived. Those who held positions at higher levels on Friday morning and are still holding them are advised to book their profit/loss on this rebound and exit. These rebounds should be treated as dead-cat bounces, where the fall will be greater than the rebound."
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
