Prices of gold and silver witnessed a significant correction during Wednesday's trading session, surrendering a portion of their recent impressive gains. The sharp pullback was primarily driven by profit booking from traders following a sustained rally, coupled with a strengthening US dollar and caution ahead of crucial economic data from the United States.
Sharp Decline in Precious Metals
On the Multi Commodity Exchange (MCX), gold February futures contracts plummeted by ₹1,670 per 10 grams, hitting an intraday low of ₹1,37,414. This marked the first decline for the yellow metal in two consecutive sessions. Despite this drop, gold has maintained a year-to-date gain of 1.71% in early 2026, building on an extraordinary 76.5% surge recorded throughout the year 2025.
The sell-off was even more pronounced in silver. March silver futures on MCX crashed by ₹11,700 per kilogram, reaching a day's low of ₹2,47,100. However, similar to gold, silver has held onto its monthly gains, remaining up by 5% so far in January. This correction comes just a day after silver prices scaled a fresh all-time peak of ₹2,59,322.
Key Factors Behind the Market Movement
Several interconnected factors contributed to the downturn in precious metals. The US dollar index, which gauges the greenback against six major currencies, climbed to a two-week high of 98.5. A stronger dollar makes dollar-denominated assets like gold and silver more expensive for holders of other currencies, dampening demand.
Investors also adopted a wait-and-watch approach ahead of key US labour market reports. The Automatic Data Processing (ADP) national employment report indicated a softer labour market, with private payrolls increasing by 41,000 jobs in December, missing the Reuters forecast of 47,000. The market's focus has now shifted to the JOLTS job openings data and the pivotal nonfarm payrolls report scheduled for release on Friday.
These figures are critical as they influence the Federal Reserve's monetary policy. The market, according to the CME FedWatch tool, is currently pricing in an 84% chance that the Fed will hold interest rates steady in its upcoming meeting. Gold, being a non-yielding asset, typically finds favour in a low-interest-rate environment.
Geopolitical Developments Add to Market Sentiment
Global geopolitical events continued to provide a backdrop of uncertainty. US President Donald Trump announced that Venezuela will transfer between 30 million and 50 million barrels of sanctioned oil to the United States. The proceeds from sales at market prices are to be managed for the benefit of both nations. This follows last week's announcement of US control over Venezuela's vast oil reserves after military action led to the capture of leader Nicolás Maduro.
In other developments, the White House warned that it has not ruled out potential military action concerning Greenland, a self-governing Danish territory. Meanwhile, in East Asia, tensions between China and Japan have escalated after Beijing imposed export controls on certain high-tech items with potential military applications, worrying Tokyo about its defence supply chains.
Analysts note that while short-term profit booking has triggered a correction, the fundamental drivers for precious metals—including geopolitical risks, economic uncertainty, and expectations of a moderate Fed policy—remain intact. Investors are advised to monitor the upcoming US economic data closely for further directional cues.
