Precious metals have experienced a sharp price correction in recent days, continuously declining since the auspicious Dhanteras period. The volatility is attributed to escalating global geopolitical issues, combined with the strengthening US Dollar and anticipation surrounding crucial US inflation data due this weekend. The forthcoming inflation report will be instrumental in determining the Federal Reserve’s roadmap for interest rates, which directly impacts investor appetite for commodities.
The pullback has been significant in the gold market. According to Kedia Advisory, ” Gold prices plunged by 5% to 1,21,857 as profit-taking intensified following a sharp rally, while the U.S. dollar strengthened and safe-haven demand eased amid improving global risk sentiment.”
The brokerage firm noted a surge in optimism over potentially easing US-China trade tensions, ahead of the scheduled meeting between Presidents Donald Trump and Xi Jinping next week, which aims to resolve ongoing tariff disputes. Domestically, the end of the seasonal gold-buying period in India contributed to reduced physical demand. This, coupled with expectations of a resolution to the US government shutdown and the upcoming inflation data, further weighed down market sentiment.
Silver, which had seen an extraordinary rally in recent weeks, also experienced a sharp drop, with prices falling by 3.17% to 1,45,558. This price volatility has led investors to unwind their safe-haven bets, temporarily shifting away from metals.
The focus remains squarely on the US inflation report, which will shape the Federal Reserve’s decision on a widely anticipated interest rate cut next week. The previous week saw silver hit an all-time high of $54.5 per ounce, following a nearly 40% rally since late September. This rally was primarily driven by a liquidity crunch in the London silver market, robust Indian festive demand, and heightened speculative interest in the metal’s industrial applications across sectors like electric vehicles, data centers, and solar energy.
While the recent price correction provides a potential entry point for long-term investors, the market is expected to remain highly sensitive to macro developments. A weaker-than-expected inflation reading could solidify the case for a Fed rate cut, potentially providing fresh support to bullion prices. Conversely, a stronger inflation print might push the dollar higher and prompt further liquidation of precious metal holdings. The gold and silver markets are thus caught in a complex balancing act between easing geopolitical risk and prevailing monetary policy expectations.
