Gold Prices Poised for Firmness, Silver Faces Turbulence in Coming Week
Gold prices are projected to maintain a firm trajectory in the upcoming week as market participants closely track pivotal global macroeconomic indicators. The primary focus will be on US inflation data, which will provide crucial cues regarding the future interest rate path. In contrast, silver is anticipated to experience heightened volatility, driven by fluctuating risk sentiment and speculative trading activities, according to industry analysts.
Key Data Points and Federal Reserve Speeches Under Scrutiny
Traders will vigilantly monitor a suite of economic releases, including US Gross Domestic Product (GDP), Purchasing Managers' Index (PMI) figures, non-farm payroll numbers, and inflation readings. Additionally, inflation data from major economies such as China, Germany, and India will be closely watched. Speeches by officials from the US Federal Reserve will also be parsed for signals on the timing of potential interest rate cuts and their subsequent impact on bullion prices.
"Gold consolidation and recovery suggest that bias still remains positive. However, in case of silver, we remain cautious of volatility and further corrections," stated Pranav Mer, Vice President of EBG - Commodity & Currency Research at JM Financial Services, in comments to PTI.
Recap of a Highly Volatile Week for Precious Metals
The past trading week witnessed significant movements in the commodities market. Gold futures on the Multi Commodity Exchange (MCX) advanced by Rs 7,698, marking a gain of 5.2 percent. Conversely, silver futures declined sharply by Rs 15,760, a drop of nearly 6 percent. Notably, the commodities market remained operational on Sunday due to the presentation of the Union Budget by Finance Minister Nirmala Sitharaman.
"Gold and silver endured an extremely volatile week as a sharp dollar rebound, shifting Fed expectations and aggressive position unwinding triggered one of the steepest corrections in decades," explained Manav Modi, Analyst - Commodities at Motilal Oswal Financial Services Ltd (MOFSL).
Modi attributed the market turbulence to several factors: easing geopolitical tensions between Washington and Tehran, progress in tariff negotiations led by then-President Donald Trump, and a reduced risk of a US government shutdown, all of which diminished safe-haven demand. Additionally, the nomination of Kevin Warsh as the next Federal Reserve Chair prompted traders to recalibrate their expectations for aggressive interest rate cuts.
"The unwind was severe: gold recorded its sharpest decline in nearly four decades, while silver languished, amplified by heavy call option positioning, margin calls and speculative driven liquidation," Modi noted.
Domestic Market Dynamics and Global Recovery
Domestic Indian markets also experienced notable volatility. While the Union Budget largely aligned with market expectations without major sector-specific surprises, bullion prices fluctuated amid swings in the Indian rupee. A softer USD/INR exchange rate, influenced by progress on a potential trade agreement between New Delhi and Washington, exerted downward pressure on local bullion prices.
Despite the pronounced selloff, Modi observed emerging signs of stabilization as forced liquidation subsided and value-based buying resumed across both precious metals. "A sharp rebound followed, aided by weaker economic data and value buying after a near 15 per cent correction in gold," he said, adding that domestic price gains were further bolstered by a rebound in the USD/INR pair from recent lows.
In global markets, gold demonstrated resilience, rising by $234.7, or nearly 5 percent, over the past week on the Comex exchange. This recovery lifted prices to approximately $5,000 per ounce from a low of $4,400 per ounce.
Fundamental Supports and Divergent Silver Performance
"There has not been much change in the fundamentals, as geopolitical uncertainty still prevails. Central banks and ETFs investors continue to add gold to their holdings, while crypto firms have also increased buying to create & trade gold tokens, backed by physical assets," Mer emphasized, highlighting the underlying strength in gold demand.
However, silver futures continued to face pressure, declining by $1.63, or 2.08 percent. "Volatility grips silver as prices pass through a phase of high swings after the parabolic rally that ended on January 30 with a flash crash from an all-time high around $121 to a recent low of $64 per ounce," Mer added, detailing the metal's turbulent price action.
Outlook: Physical Demand and Long-Term Fundamentals
According to Modi, robust physical demand from China ahead of the Lunar New Year celebrations has remained resilient and could help absorb any further selling pressure in the market.
"Broader fundamentals still support bullion through 2026, driven by central bank buying, fiscal concerns and geopolitical risks, though near-term volatility is likely to remain elevated," he projected, outlining a positive long-term view tempered by short-term unpredictability.
Analysts concur that macroeconomic data releases and commentary from Federal Reserve officials will be the primary drivers of market direction in the week ahead. Traders are bracing for continued volatility but also see opportunities for short-term buying on price dips, particularly within the gold segment.
