Gold and silver prices rise over 15%: Why are precious metals regaining momentum?

Silver futures on the Multi Commodity Exchange (MCX) rose by over 13% on Tuesday, February 3, after experiencing massive declines over the last few sessions. Silver contracts for March delivery soared by 13.4% to an intraday high of ₹2,68,025 per kg on the MCX, rising from Monday’s closing price of ₹2,36,261 per kg. 

Meanwhile, gold surged by over 6.3% to an intraday high of ₹1,53,200 per 10 gram on the MCX, up from ₹1,43,991 per 10 gram on Monday. 

Gold and silver exchange-traded funds (ETFs) also rebounded on Tuesday, rising by over 15% after falling in the past few days. Tata Silver ETF is currently trading 15.6% up on the NSE, while Nippon India Silver ETF and HDFC Silver ETF are trading 15% and 18% up, respectively. 

Other silver ETFs, like ICICI Prudential Silver ETF, SBI Silver ETF and Groww Silver ETFs, are all trading up by nearly 16%. Gold ETFs, on the other hand, are trading up by over 5%, such as the Tata Gold ETF, SBI Gold ETF, HDFC Gold ETF and ICICI Prudential Gold ETF. 

The rise of gold and silver today is confusing for many traders, especially after the massive fall seen in the last few sessions. The precious metals rebounded as investors bought at lower levels, leading to a slightly higher demand. Analysts maintain a bullish outlook on precious metals, as per market reports. 

Gold and silver price volatility

Last week, silver futures for the March expiry ended 12.7% lower, while gold futures for April delivery fell by 8.2%. During the week, the precious metals touched lifetime highs on Thursday due to heightened geopolitical tensions and a weak dollar. 

On Thursday, January 29, silver contracts hit a record high of ₹4,20,048 per kg on the MCX, and gold futures touched a lifetime high of ₹1,83,962 per 10 gram. 

Following the record rally, gold and silver futures crashed on Friday, falling by 17.1% and 26.9%, respectively. This fall was seen due to profit-booking and speculative trading. 

On Friday, US President Donald Trump nominated Kevin Warsh, a former Fed governor viewed as more hawkish, as Chair of the US Federal Reserve. The nomination strengthened the US dollar, adding downward pressure on bullion prices.

On Sunday, February 1, when the MCX held a special trading session for the Union Budget, gold futures fell by 3.01%, while silver futures dropped 8.9%. Then on February 2, silver futures fell by another 11%, and gold futures lost 2.5% on the MCX. 

In local markets, gold and silver extended their steep fall for the third session: silver prices fell by as much as ₹50,000 to ₹2.6 lakh per kg in Delhi, while gold prices declined by ₹12,800 to ₹1,52,700 per 10 gram. 

"Gold and silver languished after the US dollar surged amidst President Donald Trump's tariff negotiations, and de-escalation between the US and Iran, with US shutdown fears also being delayed once again with a liquidity push," a PTI report quoted Manav Modi, Analyst, Commodities at Motilal Oswal Financial Services, as saying. 

After falling for three consecutive sessions, gold and silver prices rebounded on Tuesday as investors bought at low levels and buying interest returned. 

Gold and silver are safe-haven assets; their demand and prices change with geopolitical conditions, market fluctuations and currency rates. 

In the coming sessions, US key data releases, dollar rate and speeches from several Federal Reserve officials are expected to affect bullion prices. 

“On the economic front, traders will also monitor US key data releases, including non-farm payrolls, the unemployment rate, and speeches from several Federal Reserve officials, which are expected to influence the precious metals market this week,” the PTI report quoted a commodity analyst as saying.