Gold prices crack ₹7,000 from peak: Is it time to shift focus towards silver?

Mint

02-05-2025

Gold price today: After a stellar rally to above the ₹ 1 lakh mark, gold prices have moderated lately, crashing ₹ 7,000 per 10 grams from their peak, to trade at ₹ 93,000 levels on the MCX. Ease in trade tensions and profit taking at higher levels are the factors behind the crash in gold prices.
For this week, MCX gold prices have declined 2.04% to ₹ 93,300 level while on the Comex, spot gold has lost 1.8% to trade at $3,255.60 an ounce.
The easing of global trade tensions reduced demand for safe-haven assets, prompting investors to cash in gains. US President Donald Trump's indications of potential trade agreements with South Korea, Japan, and India, along with optimistic comments regarding a deal with China, sparked a shift in market sentiments, said Tejas Anil Shigrekar, Chief Technical Research Analyst, Commodities and Currencies at Angel One.
According to US Treasury Secretary Scott Bessent, several major trading partners have made 'very good' offers to avoid US tariffs, with India expected to be among the first to finalise a deal.
US Federal Reserve policymakers have signalled that short-term interest rates will remain unchanged as they wait for clearer signs that inflation is nearing the US central bank's 2% goal or until there is a whiff of a deteriorating job market, according to a Reuters report. Elevated interest rates diminish the appeal of non-interest-yielding assets like gold.
Against this backdrop, analysts largely believe the best of the gold rally is already over and the yellow metal is set to face more corrections.
Kunal Shah - Head of Commodities Research - Nirmal Bang, explained that the jump in gold prices from ₹ 90,000 to ₹ 99,000 in a matter of three days was a euphoric rally, which generally happens when any asset class is in a bubble phase. "No central banks bought gold during that period. India's and China's jewellery demand remained sluggish. It was just the fear factor — that the 145% tariff on China would lead to a sharp slowdown in the world's top two economies. There were recessionary concerns globally, and all those fears led to that parabolic move," Shah highlighted.
He said this kind of move takes place once in a decade, and we have likely already seen the peak, as far as the highs are concerned. "I believe that $3,500 seems to be the top for gold. I'm not expecting that level to be revisited soon. So with every upside in gold futures, due to any positive news or negative economic data, the rally is likely to remain very short-lived," Shah added. He believes that profit taking in gold will continue as all the positive factors that could drive gold higher are already discounted in the price.
He expects gold to touch $3,000 or $2,950 in the next three to four months on Comex and ₹ ₹ 89,000 to ₹ 88,000 on the MCX.
Echoing similar views, Shigrekar of Angel One said gold prices are likely to decline further as easing trade tensions reduce the metal's safe-haven appeal. "Traders with a more aggressive strategy could look to buy during the consolidation phase in the demand zone at ₹ 91,600– ₹ 91,200, with major support at ₹ 90,300. A significant reversal in the near-term trend may follow," opined Shigrekar. He has a target price of ₹ 95,100 – 95600.
As weakness in gold is expected to persist, and with the gold-silver ratio staying elevated, analysts are turning bullish on the white metal.
Shah explained that when gold prices decline, silver typically follows suit—though not always to the same degree—since a downturn in gold often weighs on silver. He noted that silver prices are currently subdued due to high tariffs on solar panels, which have reduced exports from China to the US. These exports account for approximately 18% of global solar panel trade. Given that the solar sector has been a key driver of silver demand, especially with its double-digit growth in recent years, the tariff impact has temporarily softened silver prices.
He, however, believes that this trend is likely to be short-lived. Any constructive deal between the US and China — even just sitting down for negotiations — could lead to an upside in silver, Shah said.
Additionally, the elevated gold-to-silver ratio also signals a potential mean-reversion opportunity in silver, according to Rishabh Nahar, Partner and Fund Manager at Qode Advisors PMS.
"Historically, when the ratio crosses 80, silver tends to outperform gold in subsequent periods. With the ratio hovering near multi-decade highs, silver appears undervalued relative to gold. This divergence isn't just technical it reflects how silver has lagged in pricing in the same macro risks that are driving gold: geopolitical uncertainty, central bank accumulation, and currency debasement trends. For investors, this makes silver an attractive, asymmetric bet within the precious metals basket," added Nahar.
Shah believes that ₹ 90,000 to ₹ 92,000 is a great level to re-enter long positions in silver on the MCX. And for COMEX, $31 to $30.50 is a great level to re-enter, he said, as he expects silver could go up to $35–$38 on COMEX in the next six months. In India, silver prices can hit ₹ 1,05,000 to ₹ 1,10,000 per kg, according to his estimates. "Any downside we see because of gold's fall should be used as a buying opportunity. Our outlook on silver is quite constructive compared to gold," Shah added.
This week, silver prices on MCX have moderated by 3.5% to ₹ 94,000 per kg levels and Comex silver prices by 1.9% to $32.4.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
First Published: 2 May 2025, 04:13 PM IST