Gold and Silver Prices Witness Steep Decline on MCX
Gold and silver prices continued their downward trajectory on Monday, February 2, tracking significant weakness in global bullion markets. The prevailing risk-off sentiment, coupled with a stronger U.S. dollar, contributed to the selloff, while profit-taking by investors further weighed on market sentiment.
Sharp Drop in MCX Rates
On Monday, MCX gold prices traded at ₹1,38,888 per 10 grams, marking a substantial decline of ₹8,865 or 6%. Meanwhile, MCX silver prices experienced an even steeper fall, tumbling ₹31,878 or 12% to ₹2,33,774 per kg. This decline has pushed gold prices 24% lower from their record high of ₹1,80,799, which was hit on Thursday, January 29. Silver prices have crashed dramatically by 44% from their peak of ₹4,20,048.
Trigger for the Selloff
The dramatic selloff in gold and silver prices was primarily triggered by the nomination of Kevin Warsh as chair of the Federal Reserve by US President Donald Trump. According to a Bloomberg report, traders regard Warsh as the toughest inflation fighter among the final candidates. This has raised expectations of tighter monetary policy, which would underpin the US dollar. A strong greenback increases the cost of buying gold for holders of other currencies, thereby weighing on demand.
Historical Context and Investor Gains
Investors should note that despite the sharp decline in precious metals, those who caught the cycle early are still sitting on massive gains. Gold prices had surged over 70% last year, while silver saw an impressive 170% increase. However, the recent decline has erased most of the gains logged by these metals in the first month of the new year, with a deeper cut observed in silver prices, underscoring its more volatile nature.
Volatility Comparison: Gold vs. Silver
According to data from The Conversation, silver's spectacular gain came with 36% "annualised volatility," which measures how much a stock price varies over one year. This was nearly double that of gold's 20% volatility over the same period. This signals that assets that rise quickly can also fall rapidly, highlighting the inherent risks in volatile markets.
Expert Recommendations and Market Outlook
Mirrae Asset, in a recent report, indicated a preference for gold over silver amid the extreme volatility in both precious metals. The report stated, "We have maintained a cautious stance on silver following its parabolic move and have suggested trimming overallocation to precious metals to realign portfolios with long-term strategic allocation levels. While it is prudent to wait for further information and trend confirmation, we currently prefer gold from a relative risk–reward perspective."
Gold is widely regarded as an effective hedge against equity market corrections, currency weakness, inflation uncertainty, and rising geopolitical tensions. In contrast, silver tends to remain more vulnerable due to its higher price swings, especially when risk appetite deteriorates.
Advisory Insights from Market Analysts
Rahul Kalantri, VP of Commodities at Mehta Equities, also believes that amid market volatility, gold continues to be the safer and more stable option for investors focused on wealth preservation. He noted, "In such uncertain phases, maintaining gold as the core precious metal allocation may offer better stability, while silver can be used selectively as a tactical exposure. A balanced approach, rather than choosing one over the other, is often more suitable for long-term investors."
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.
