Will Gold and Silver Prices Decline Further?

Gold prices had a dream run in 2020; the yellow metal’s price has finally come down by about 20% from the record highs seen in August 2020. The gold price has declined by Rs 12,000 after touching a record high of Rs 57,000 per 10 grams. This has translated to around 9.2% depreciation in the previous two months.

Currently, the gold price lingers below Rs 45,000 on the multi-commodity exchange (MCX) in the future market. Silver futures have further slumped Rs 1,600 or 2.3% to Rs 68,325 per kg. The international spot price of silver also declined from USD 26.68 to USD 25.20. The near term looks negative as there is anticipation that prices could further decline to USD 23 internationally.

Now the question is, is it the right time to buy gold and silver given the current circumstances. Industry experts believe that if there are people who could not invest in gold and silver considering high prices, this is the right time to do it. 

The dip in gold and silver price in the domestic market complies with the international market prices after the US Fed Chairman passed his comments on inflation and bond yield. Comex gold prices declined due to increasing treasury yields which is making possessing gold an expensive affair. The strengthening of the dollar is also making gold purchasing expensive. Heavy outflows via Gold ETFs is one of the reasons for the decline in gold prices.

Industry analysts anticipate that gold prices will remain sideways for the short term, considering that vaccination drives worldwide to pick up the pace, which may result in complete normalcy amongst economic activities.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in