Gold and silver prices crashed in Indian markets Friday as investors engaged in heavy profit-taking following a record-breaking rally. Institutional liquidation and a strengthening US dollar were the main causes of the steep fall, and analysts noted that both precious metals were in extremely overbought conditions.
How severe was the price crash?
In one of the most dramatic single-day declines, gold prices in India collapsed by ₹14,000 per 10 grams, a drop of 7.65 per cent. Silver mirrored the fall, tumbling by ₹20,000 per kilogram, a nearly 5 per cent decline. This reversed the metals’ trajectory just one day after they had scaled unprecedented all-time highs in the domestic market.
Gold: Crashed to ₹1,69,000 per 10 grams (inclusive of taxes) from Thursday’s record of ₹1,83,000.
Silver: Plunged to ₹3,84,500 per kg from its peak of ₹4,04,500.
Why did gold and silver prices fall?
Three main variables came together, according to analysts: aggressive profit-taking, technical overbought conditions, and dollar strength. “This decline was mainly fuelled by the heavy liquidation of long positions by large institutional players, who sought to secure gains after a strong multi-session advance,” explained Saumil Gandhi, Senior Commodities Analyst at HDFC Securities.
What does ‘overbought’ mean for prices?
When prices have increased too much and too quickly, the market is said to be “overbought,” leaving it open to a decline. Gandhi noted that both metals had been trading in this stretched territory for several sessions, which heightened the risk of a sharp pullback as soon as selling pressure emerged, creating a cascade effect.
What happened in international markets?
The sell-off was a global phenomenon, not limited to India. Spot gold in international markets fell 5.31% to $5,087.73 per ounce after hitting an intraday low of $4,945.26. Silver witnessed an even steeper drop of 12.09%, falling to $101.47 per ounce. This global weakness, combined with a recovery in the US dollar—which makes dollar-priced bullion more expensive for other currency holders—amplified the downward pressure on domestic prices.
What is the short-term outlook?
The immediate outlook remains under pressure due to the factors that triggered the crash. Gandhi suggested the combination of stretched technicals, institutional profit-taking, and a likely continued recovery in the US dollar would weigh on bullion prices in the near term. Markets are expected to remain volatile as they absorb the shock of the correction.
