Precious Metals Slide as Strong Dollar Triggers Profit Booking
Gold and Silver Face Sharp Correction
Precious metals witnessed a sharp sell-off on Friday, with gold and silver prices tumbling from their recent highs. The decline was largely driven by a strengthening US dollar and the unwinding of yen carry trades, which together dampened investor appetite for safe-haven assets. The correction came after a strong rally in January, prompting many investors to lock in profits.
In the domestic spot market, gold prices fell 5.4% to around ₹1.66 lakh per 10 grams, marking a steep decline of nearly ₹9,545 in a single session. Silver saw an even sharper fall, plunging 10.7% to about ₹3.39 lakh per kilogram. The speed and magnitude of the fall reflected heightened volatility across global commodity markets.
ETFs See Deeper Cuts Than Spot Prices
The correction in spot prices quickly spilled over into exchange-traded funds (ETFs) linked to precious metals. Notably, ETFs declined more sharply than the underlying metals, suggesting an exit of speculative and short-term positions.
- Silver ETFs dropped between 18% and 24%
- Gold ETFs corrected by 8% to 12%
This divergence highlights how leveraged and speculative investments tend to react more aggressively during periods of market stress. Silver ETFs, which had seen strong inflows over the past few months, were particularly vulnerable during the sell-off.
Global Cues Add to Market Pressure
Market participants pointed to multiple global factors behind the sharp fall. Expectations of a more aggressive interest-rate outlook in the United States weighed heavily on precious metals, which typically struggle in a rising rate environment. Additionally, the unwinding of yen carry trades removed a key source of liquidity that had previously supported commodity prices.
The policy stance of major central banks also played a role. Japan’s central bank had earlier raised interest rates to multi-decade highs and maintained a steady stance in its recent meeting, prompting investors to reassess risk positions globally. Speculation around a potentially more hawkish US monetary leadership further added to the pressure on gold and silver prices.
Selective Buying Emerges at Lower Levels
Despite the sharp correction, the dip attracted some bargain hunting. Market participants noted that long-term investors and jewellers stepped in to buy at lower price levels, viewing the decline as a temporary pause rather than the end of the bullish trend.
Jewellery manufacturers used the opportunity to replenish inventories, although retail demand from end consumers remained muted. Many investors continue to believe that the broader outlook for gold remains constructive, supported by global uncertainty and long-term inflation concerns.
Outlook: Volatility Likely to Persist
Experts caution that precious metals may remain volatile in the near term as currency movements, global interest-rate expectations, and speculative positioning continue to influence prices. While the recent fall was driven largely by profit booking rather than a shift in fundamentals, investors are advised to remain cautious and factor in short-term fluctuations.
For long-term investors, gold and silver continue to play a role as portfolio diversifiers. However, the recent episode underscores the importance of disciplined investing and awareness of global macroeconomic triggers.
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