Precious Metals Experience Dramatic Intraday Swings on MCX
Gold and silver prices on the Multi Commodity Exchange (MCX) witnessed wild fluctuations during Monday's trading session, showcasing extreme volatility in the precious metals market. While gold futures managed to recover all of their intraday losses and turned positive, silver contracts erased most of their early-day declines but still traded with minor losses by the evening.
Gold Futures Show Remarkable Recovery After Sharp Decline
The February gold futures contract on MCX opened the session lower at ₹1,46,500 per 10 grams, facing immediate selling pressure that intensified throughout the morning. This downward momentum dragged the precious metal to its day's low of ₹1,37,065, representing a significant drop from the opening price.
However, in a dramatic turnaround, gold staged an impressive recovery, bouncing back ₹13,825 to reach the day's high of ₹1,50,890. Despite this substantial intraday rebound, prices remain down by approximately 21% from Thursday's peak of ₹1,80,779. This follows Friday's session where gold prices tanked nearly ₹20,000 per 10 grams to ₹1,49,653, marking the biggest intraday crash in over a decade.
Silver Futures Also Stage Sharp Comeback
Meanwhile, the March silver futures contracts demonstrated similar volatility, staging a sharp recovery during the trading day. Silver bounced back ₹35,868 or 14% per kilogram from the day's low of ₹2,25,805 to reach the day's high of ₹2,61,673. Despite this significant rebound, silver prices were still trading down by approximately 5% as of 8:00 PM on Monday.
International Markets Mirror Domestic Volatility
The volatility wasn't confined to Indian markets alone. In international trading, spot gold prices regained 11% from the day's low to reach $4,884 per troy ounce. Similarly, spot silver prices recovered 23.3% from intraday lows to $87.96 per ounce, indicating synchronized movements across global precious metals markets.
Key Factors Driving Precious Metals Volatility
Federal Reserve Policy Expectations and Dollar Strength
Following a bumper rally that extended into January, gold and silver prices lost their appeal last week after US President Donald Trump nominated Kevin Warsh to lead the Federal Reserve. This development sent the US dollar index higher, making greenback-priced commodities more expensive for holders of other currencies.
Traders regard Warsh as the toughest inflation fighter among the final candidates for the Fed chair position, raising expectations of tighter monetary policy that would support the dollar and weaken dollar-denominated bullion. Investors continue to expect one Fed rate cut in June and another later in the year, possibly in October.
CME Margin Hike Adds to Selling Pressure
Apart from the anticipated hawkish stance from the Fed, a CME margin hike has also supported the sell-off in precious metals. CME Group announced increases in margins on its metal futures on Saturday, with the changes set to take effect after market close on Monday. This regulatory move typically reduces speculative activity by requiring traders to post more collateral for their positions.
Chinese Speculation Contributes to Market Turmoil
Market analysts have also blamed the sharp decline in gold and silver markets on Chinese speculators who had loaded up on leveraged long-side bets using futures and options—possibly without fully understanding the risks associated with such high leverage. Bloomberg reported that Chinese metals traders have incurred losses totaling at least 1 billion yuan after one of their counterparties fled the country, leaving deals unfinished.
Analyst Perspectives on Market Movements
Technical Levels and Market Sentiment
Jateen Trivedi, VP Research Analyst, Commodity and Currency at LKP Securities, commented on the day's action: "Gold traded sharply weak in the early morning session as CME Gold slipped below the $4,500 mark, dragging MCX Gold down nearly ₹9,000 to sub-₹1,38,000 levels. However, strong short covering and bargain buying emerged thereafter, with CME recovering towards $4,700 and MCX Gold bouncing back near ₹1,46,500."
He noted that volatility remains extremely high following the recent margin-led correction and profit booking from record highs. From a technical perspective, key support for gold is placed near ₹1,35,000, while resistance is seen around ₹1,50,000.
Silver's Broader Bullish Trend Intact
Ponmudi R, CEO of Enrich Money, provided insights on silver's outlook: "The broader trend for silver remains decisively bullish, with the steep rising channel intact and major EMAs providing strong dynamic support. The ₹2,35,000–₹3,40,000 zone remains a critical base."
He identified immediate resistance near ₹2,90,000–₹2,92,000, with potential extension toward ₹3,25,000 if momentum sustains. According to Ponmudi, dips continue to offer accumulation opportunities for positional participants looking to enter the silver market.
Market Outlook and Investor Caution
The precious metals market continues to exhibit heightened volatility driven by multiple factors including Federal Reserve policy expectations, regulatory changes, and speculative activity. While Monday's session showed significant recovery from intraday lows, questions remain about whether the rally can sustain given the fundamental headwinds facing bullion.
Investors are advised to monitor key technical levels, global economic developments, and central bank policies closely when considering precious metals investments in the current volatile environment.
