Gold and silver markets have been through an extraordinary few sessions, with prices crashing sharply and then bouncing back just as quickly, unsettling investors across the globe. The sudden swings have coincided with a stronger US dollar, heavy unwinding of speculative positions and fresh headlines around progress on an India–US trade deal. Motilal Oswal says the recent turmoil has more to do with how crowded trades were unwound than with any fundamental weakness in precious metals.
According to the brokerage, the sell-off began after the US dollar strengthened sharply, forcing traders to reassess bullish bets built during a steep and near-vertical rally in gold and silver. As prices started slipping, margin calls kicked in and investors rushed to cut exposure. In gold, this snowballed into forced selling, with spot prices falling more than 10 per cent at intraday lows before stabilising later in the session.
The fall was magnified by the sheer scale of call option positions that had built up during the rally. Once prices broke lower, dealers were forced to sell hedges, which added to the downward pressure. Silver saw even more violent moves. With a smaller market size and higher participation from retail and leveraged traders, the metal dropped sharply as speculative positions were unwound, particularly those linked to overseas markets.
Despite the intensity of the fall, Motilal Oswal notes that selling pressure eased relatively quickly. Buying interest emerged at lower levels, suggesting that the bulk of forced liquidation may now be behind the market. Physical demand has remained steady, especially in Asia, and helped absorb selling from leveraged institutional trades.
The brokerage believes the pace of unwinding has slowed, indicating a shift away from panic selling. However, it cautions that volatility is likely to remain high in the near term as markets adjust to new price levels and traders remain sensitive to global cues.
India–US trade deal and the currency impact
Fresh volatility entered the market after comments by Donald Trump following discussions with Narendra Modi, which pointed to progress on a US–India trade agreement and a sharp reduction in overall tariffs. These signals weighed on the US dollar and led to a stronger rupee.
USD-INR fell by nearly Rs 2, a move that is significant for Indian investors in gold and silver. Even when global prices rise, a stronger rupee can limit gains in domestic markets. Motilal Oswal says currency movement will remain a key factor to watch in the coming weeks.
Gold outlook: Correction seen as technical, not fundamental
Motilal Oswal remains positive on gold over the medium to long term. The brokerage says the recent fall does not reflect any deterioration in underlying fundamentals. Central banks are likely to keep buying, global tensions aren’t going away, and worries about the US government’s finances are still in the background. That mix keeps the appeal of safe-haven assets intact. Prices may cool off or move sideways in the short term, but the bigger picture still works in gold’s favour as a hedge well into 2026.
Silver outlook: Volatility stays, but demand story intact
Silver continues to trade with much sharper swings than gold, and Motilal Oswal describes it as remaining in a speculative zone in the short term. That said, the brokerage underlines that silver’s long-term demand drivers have not changed. Consumption from solar power, data centres and AI-related infrastructure remains strong, and physical supply has shown signs of tightness in key markets.
These factors, it says, should help prevent a prolonged slide in prices, even though sharp ups and downs are likely to persist.
Where prices stand now?
In the domestic market, gold was trading around Rs 1,49,000 per 10 grams, while silver was near Rs 2,65,514 per kg at around 5:30 pm on February 3. Both metals have recovered a portion of their recent losses but remain well below the peaks seen during last month’s rally.
Buy, sell or hold? Motilal Oswal explains
Given the recent swings, Motilal Oswal advises investors to avoid chasing prices after sharp rebounds. For gold, the brokerage suggests holding existing positions and looking to accumulate gradually on declines rather than making aggressive fresh bets at elevated levels. For silver, caution is advised in the short term due to extreme volatility, though long-term investors with a higher risk appetite may continue to hold.
