Briefly recovering 2 days, ‘This has been a dead-cat bounce’ theory is in action. Multi Commodity Exchange (MCX) precious metals were under heavy selling pressure on today following a global slide in bullion prices.
- MCX Gold: April delivery futures fell more than 1.25%, and were poised at close to ₹1,51,127, after hitting an intraday low of ₹1,48,455.
- MCX Silver: The “white metal” suffered a crushing blow, plummeting nearly 9% to a paltry ₹2,44,654 per kg, even hitting a 6% lower circuit during early trade.
Why are Prices Falling?
The jarring turnaround is being blamed on a “triple whammy” of global and domestic forces:
- Hawkish’s Fed pivot: Markets have been rattled over President Trump's nomination of Kevin Warsh as the next Fed Chair. Warsh, viewed as a “monetary hawk” who may slow interest rate cuts to fight inflation.
- Dollar Strength: A strong US Dollar, buoyed by safe-haven withdrawals from tech stocks (in a world of global AI related tech rout), has driven up the price of gold for holders in other currencies.
- Geopolitical Cool: News of potential nuclear talks between the United States and Iran in Oman has eased somewhat the “war premium” that previously kept gold prices at historically high levels.
Is the Rebound Over?
Analysts at major brokerage firms are split. Some see this as a healthy "price digestion" following historic highs of January (gold hit $5,600, silver hit $121 globally), others foresee more downside.
- Support Levels: Technical experts see instant support for MCX Gold at ₹1,45,500 and Silver at ₹2,35,000.
- The Chinese Factor: With the Chinese Lunar New Year looming in mid-February, an even more decrease in speculative liquidity from Asia could result in what traders call "thin" and intensely volatile markets.
Investor Strategy
The current volatility suggests a ‘wait and watch’ strategy for retail investors. As the structural demand for silver remains strong due to AI & needs for green energy, however, the market for paper (futures) is dominated by margin calls and forced liquidations, at present.
