Precious metals are glittering as the year concludes, with gold and silver tracking towards their most impressive annual gains in over four decades. According to Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers, this stellar performance is set to continue into the new year, backed by strong fundamental drivers.
What Drove the Rally and the Recent Dip?
The journey to this peak wasn't without volatility. Earlier this week, gold prices edged higher, attempting to recover from a sharp 4.5% drop—its largest single-day fall since October. This sudden decline was triggered by a move from the Chicago Mercantile Exchange (CME) Group, which increased margin requirements for gold and silver futures contracts.
This technical adjustment prompted widespread profit-taking and portfolio rebalancing among traders. Silver felt an even sharper sting, losing nearly 9% in a single session on Monday. However, Sharma emphasizes that this pullback is a temporary correction within a much larger bullish trend.
The foundational rally throughout 2026 has been fueled by a potent mix of safe-haven demand. Uncertainties surrounding US trade tariffs, coupled with heightened geopolitical tensions in the Middle East and key Asian regions, drove significant flows into gold, especially in the first half of the year.
Silver's Unique Supply Squeeze and China Factor
Silver's story has an added layer of complexity tied to physical supply. The metal's latest upward move this month comes just two months after the London market endured a severe squeeze. Critical inventory levels were eroded by strong flows into Exchange-Traded Funds (ETFs) and robust exports to India.
While London's vaults have seen some replenishment since, a substantial portion of the world's available silver remains in New York. Traders there are awaiting the outcome of a US probe that could lead to new tariffs or trade restrictions.
Adding more fuel to the bullish sentiment is a major policy shift from China. The announcement of export curbs on processed silver, effective from the start of January, is estimated to anchor an incremental loss of 400–500 tonnes next year. This is set to widen the existing supply deficit.
The global silver market is already projected to witness its fifth consecutive year of supply deficit in 2026, with the current shortfall equivalent to roughly 8-10% of annual consumption. The Chinese export restrictions could increase this deficit by about 1-1.2%.
Short-Term and Weekly Outlook for Investors
Maneesh Sharma provides a clear outlook for traders and investors navigating the precious metals space as the year turns.
Short-term View: Gold and silver may trade steadily with limited downside at the start of the new year, as strong fundamentals continue to underpin market sentiment.
Weekly View:
- Spot Gold: Positive Bias.
- Silver: Buy on Dips. Prices are likely to regain momentum and retest the level of $80 per ounce in the spot market in the coming weeks.
Sharma notes that the upcoming holiday-shortened week may see lower trading volumes, with few major macroeconomic cues except for the FOMC meeting minutes. Consequently, volatility could rise at the start of next year. The prudent strategy, according to the expert, is to continue buying on every dip for a favourable investment in precious metals heading into 2026.
(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)
