Gold, silver prices might crash up to 8%: Here's why
What's the story
The ongoing conflict between the US and Iran has caused a spike in gold and silver prices. However, experts warn that if tensions ease or a diplomatic breakthrough is achieved, these precious metals could see a sharp correction of 3-8%. This potential drop is due to the unwinding of the safe-haven premium that has been driving up prices during this period of heightened geopolitical risk.
Response
Gold surges to multi-week high
The US-Iran conflict has raised fears of a prolonged regional war, leading to increased demand for safe-haven assets like gold and silver. After a consolidation phase in February, these precious metals have hit multi-week highs. On Monday, international gold prices crossed $5,400 before some profit-taking set in later in the day. In India, MCX gold prices neared ₹170,000 yesterday.
Price surge
Silver prices also see an uptick
Along with gold, silver has also seen a price surge amid the ongoing conflict. Today, spot silver prices rose by 0.2% to $89.64 per ounce after hitting a four-week high in the previous session. The spike in both precious metals highlights their role as safe-haven assets during times of geopolitical uncertainty and conflict.
Market forecast
Fund managers predict potential price corrections
Satish Dondapati, Fund Manager at Kotak Mahindra AMC, has predicted that if geopolitical risks persist, bullion prices may remain firm in the short term. However, he also warned of a possible correction or profit booking if the situation calms down. Harshal Dasani from INVasset PMS echoed this sentiment and said that easing tensions could lead to a 3-5% pullback in gold, and a sharper 5-8% reaction in silver.
Market reaction
Warning of rapid profit-booking trigger
Gaurav Garg, a Research Analyst at Lemonn Markets Desk, said the current rally in gold and silver prices is largely driven by a pronounced risk-off sentiment. He warned that any diplomatic breakthrough could trigger sharp profit-booking given the rapid rally over a short period.