Gold and Silver Prices Plunge Sharply Amid Easing Trade Tensions

Gold and silver prices experienced a sharp decline on Tuesday. Global gold prices slipped below the $4,000-an-ounce mark, while in the national capital, gold prices fell by Rs 4,100 to Rs 1,21,800 per 10 grams. Gold of 99.5 per cent purity also tumbled by Rs 4,100 to Rs 1,21,200 per 10 grams. Silver prices witnessed a significant correction, dropping by Rs 6,250 to Rs 1,45,000 per kilogram. Analysts attribute this steep fall primarily to diminishing safe-haven demand driven by optimism over easing US-China trade tensions. Saumil Gandhi, senior analyst – commodities at HDFC Securities, pointed to technical selling after gold failed to maintain levels above the $4,000 psychological threshold. Praveen Singh, head of commodities and currencies at Mirae Asset Sharekhan, added that reduced safe-haven demand due to US-China trade deal optimism and outflows from global gold-backed ETFs are further pressuring prices. Investors are also awaiting the US Federal Open Market Committee's policy outcome, where a rate cut is expected. Analysts like Gandhi foresee potential further corrections of 5-10% as large players may book profits after significant gains this year.

Impact: This sharp fall in gold and silver prices affects investors holding these precious metals. It also impacts businesses involved in gold mining, refining, jewelry manufacturing, and trading. For consumers, lower gold prices might boost demand for jewelry. Overall, it signals shifting investor sentiment away from traditional safe havens towards riskier assets amid trade optimism. Rating: 7/10.

Difficult Terms: Safe-haven appeal: The characteristic of an asset that investors flock to during times of market uncertainty or economic downturn, expecting it to retain or increase its value. Bullion: Gold, silver, or other precious metals in bulk form, typically cast into bars or ingots. Technical selling: Selling of an asset based on chart patterns, price trends, or historical trading data, rather than fundamental economic factors. Psychological threshold: A price level that is significant in the minds of traders and investors, often acting as a point of resistance or support. Exchange Traded Funds (ETFs): A type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. Gold-backed ETFs hold physical gold. Federal Open Market Committee (FOMC): The monetary policymaking body of the United States Federal Reserve. Basis point: A unit of measure used in finance to describe the percentage change in a financial instrument. One basis point is equal to 0.01% (1/100th of a percent).