Why Did Gold and Silver Prices Fall Sharply Today? Here’s the Reason

Synopsis: Safe havens like Gold and Silver cooled off in today’s trade as traders booked profits after record highs and geopolitical tensions eased, reducing safe-haven demand.

Gold and silver, typically considered everyone’s “safe haven” when markets get uncertain, plunged in today’s trade. After reaching record highs just yesterday, both metals dropped quickly. So in this article, we will try to unhook the reasons behind it.

MCX gold made a day low of Rs 1,48,777 per 10 grams, compared to the previous close of Rs 1,52,862. Gold was trading down by Rs 4,085 (-2.7%) at Rs 1,48,777 per 10 grams, after hitting a fresh record high of Rs 1,58,475 in the previous session.

Meanwhile, MCX silver prices made a day low at Rs 3,05,753 per kg, against the previous close of Rs 3,18,492. Silver was trading down by Rs 12,666 (-4%) at Rs 3,05,753 per kg, after touching an intraday high of Rs 3,25,602. In the previous session, silver prices had surged to a fresh lifetime high of Rs 3,35,521 per kg.

Reason behind the fall

The main cause behind the current fall of gold and silver is profit booking. After gold and silver hit new highs, many traders don’t wait for prices to go even higher. Instead, they sell and lock in their profits. Such selling increases the supply of the market, which naturally leads to a drop in prices. 

Additionally, the rally in gold and silver also cooled off due to reduced geopolitical tensions. A few reports cited that Donald Trump withdrew his threat of tariffs on European allies due to the Greenland issue and also said that the US is exploring a potential deal on Greenland after talks with Nato, which helped ease market worries. 

When such tensions reduce, gold and silver often fall because the fear buying slows. Gold and silver are safe haven assets by definition, so people buy them more when they get scared of wars and political conflicts. But when the global tensions are not very intense, investors stop racing to gold and silver, which eventually leads to a drop in prices

In addition, the market gets overheated after such a strong rise. It has happened many times that the prices have run up too fast in just a few sessions. At that point, even a slight negative trigger can lead to a bigger correction. This is a normal pattern in commodities: a sharp rise, a pause, a correction, stabilization.

Silver tumbled more drastically as it is naturally more volatile than gold. Silver prices fluctuate in both directions at a faster pace. A minor sell can trigger a larger price change. In addition, silver has a combination of demand, partly from the investment side and partly from the industrial side, hence it quickly changes its reaction to a shift in market sentiment.

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