Gold Price Prediction: Near-Term Pressure and Silver Volatility Analyzed
Gold prices are likely to remain under pressure in the near term, while silver prices are expected to exhibit high volatility, according to Praveen Singh, Senior Fundamental Research Analyst for Currencies and Commodities at Mirae Asset Sharekhan. This outlook comes after a turbulent period for precious metals, marked by sharp price swings driven by geopolitical and economic factors.
Recent Performance and Market Dynamics
Precious metals surged to fresh record highs on January 29, only to tumble sharply the following day. This decline was triggered by the unexpected nomination of Kevin Warsh as the next Federal Reserve Chair by US President Trump. Warsh, known as a hawkish contender, advocates for a smaller balance sheet and is an inflation hawk, sparking fears of tighter monetary policy among traders.
The US dollar strengthened, aided by this announcement and supportive data, including hotter-than-expected Producer Price Index (PPI) and encouraging Chicago PMI figures. This dollar strength further weighed on precious metals and other commodities. Additionally, the CME Group raised margin requirements for precious metals and the Platinum Group Metals (PGM), effective after Monday's close, adding to the negative sentiment.
Geopolitical concerns over Iran have remained contained as the US explores diplomatic options. However, stretched positioning, deleveraging, profit booking, and tactical selling have heavily impacted precious metals. Notably, gold and silver had surged 30% and 70% year-to-date as of January 29.
Spot gold closed with a weekly loss of 1.87% at $4,894 on January 30, tumbling nearly 10% that day. The total decline from the record high of $5,595 on January 29 to the low of $4,402 on February 2 amounts to a steep loss of $1,193, or over 21%. Despite this, gold is still up around 12% year-to-date, highlighting the significant price rise in January. At the time of writing, spot gold was trading at $4,703, down 3.90% for the day.
Economic Data and Market Indicators
Recent data releases have shown mixed signals. On Monday, S&P US global manufacturing PMI for January came in at 52.40, topping the estimate of 52. Similarly, ISM manufacturing PMI for January was 52.60 versus an estimate of 48.50, marking the first month of expansion in the manufacturing sector in 12 months and reaching the highest level since August 2022.
China's Caixin manufacturing PMI stood at 50.30 in January, exceeding the estimate of 50. In the Eurozone, manufacturing PMI was 49.50, above the median estimate of 49.40, but the sector contracted for the third consecutive month.
Dollar Index and Yield Movements
The US Dollar Index, which fell to a four-year low of 95.55 on January 27, closed at 96.99 on January 30, down 0.6% for the week. At the time of writing, the index was hovering around 97.54, up nearly 0.55% for the day.
Two-year US yields, despite Warsh's nomination, were down by 2 basis points to 3.52% on Friday and finished the week nearly 2% lower. Ten-year yields were up by 1 basis point to 4.235% and remained steady for the week. Currently, two-year yields are up by 1% to 3.56%, while ten-year yields at 4.27% are up around 0.60% for the day.
Gold ETF and COMEX Inventory Trends
As of January 30, total known global gold ETF inventories stood at 100.54 million ounces, up nearly 2% year-to-date. Registered COMEX gold inventory reached 19.04 million ounces, the highest level since December 15, but is down nearly 25% from the record peak of 24.25 million ounces seen in April 2025.
Eligible COMEX gold stock is at 16.71 million ounces, down over 25% from the record level of 22.45 million ounces reached in April and at the lowest level since December 19.
Global Developments Impacting Commodities
In a bid to counter China, US President Trump announced the launch of a strategic critical minerals stockpile with $12 billion in seed money, termed Project Vault. This project will focus on minerals such as gallium, cobalt, and rare earths.
Chinese media has called for a stronger Yuan to enhance its use in international trade, investment, and foreign exchange markets, aiming for global reserve currency status, as per an article in Qiushi Journal on January 31.
CFTC Data and Market Sentiment
Hedge fund managers reduced their net bullish gold bets to an 8-week low of 121,421 lots in the week ending January 27. The most bullish position since 2020 was 285,000 lots noted in the week ending February 25.
Gold Price Outlook and Forecast
Barring escalating geopolitical tensions, gold is likely to face pressure in the near term, although underlying fundamentals remain strong. Upcoming US ISM services data and nonfarm payroll figures are expected to cap upside movements in the metal.
Gold is anticipated to be highly volatile, with potential declines to $4,390 or $4,290. Upside is expected to be capped around $5,000. The recently struck India-US trade deal and an appreciating Indian Rupee may further pressure commodities in domestic markets and exchanges.
Silver Price Outlook and Volatility
Silver, often called the devil metal due to its inherent volatility, fell 41% from its record high of $121.65 on January 29 to $71.40 on February 2. At the time of writing, it was trading at $78.68, down nearly 7% for the day but still up 10% year-to-date.
Unlike gold, silver ETFs, now at 823 million ounces, have seen a drawdown of nearly 5% year-to-date. Silver, being a smaller market and lacking central bank buying support, is expected to be highly volatile.
Silver is forecasted to trade between $70 and $90, with interim resistance at $85. Traders are advised to sell into rallies with a strict stop-loss above $90. A breach of the crucial support at $70 could lead to a test of the $65 support level.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
