Is the gold, silver investment narrative coming to an end with up to 17% crash in one day? Here's what experts say

Gold and silver

• Gold and silver prices fell sharply, snapping a record bull run on January 30
• US President Trump picked Kevin Warsh as new Federal Reserve Governor
• Analysts suggest investors view the price drop as a buying opportunity

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Gold and silver prices crashed up to 17 percent on January 30, snapping a record bull run. Analysts have commented on what lies ahead for the precious metals, and what investors should do.

Gold futures with April expiry on MCX dropped around 9 percent to hit a low of Rs 1,67,406 per 10 grams. This comes a day after the contracts hit a fresh lifetime high of Rs 1,93,096 per 10 grams. This means that the gold futures fell 13 percent (Rs 25,690 per 10 grams) in just one day.

Silver futures with March expiry meanwhile dropped nearly 17 percent to Rs 3,32,002 per kilogram. This marks a fall of nearly 21 percent (Rs 88,046 per kilogram) in just one day after hitting a fresh lifetime high of Rs 4,20,048 per kg.

Trump picks Kevin ‌Warsh as new Fed Governor:

The sharp fall in global prices of the precious metals comes amid speculations that the US Federal Reserve may get a more hawkish chair.

Later during the day, the speculations did come true as US President Donald Trump said ​he had ‍chosen former ⁠Federal ‍Reserve Governor ‌Kevin ‌Warsh to ⁠head ⁠the ​American central bank.

What lies ahead for gold and silver?

Today’s sharp fall in gold and silver prices can be explained as a classic bout of profit-booking after an extended record rally and not as a breakdown in fundamental sentiments, said Pranav Koomar, Founder and CEO of PlusCash.

While high positioning, strong dollar movements, and an uptick in bond yields have contributed to a correction in gold prices, from a medium- to a long-term perspective, the prices have continued to find support due to global uncertainty, buying from Central Banks, and tight supply dynamics, the analyst added.

Investors should consider any fall as a buying opportunity and not a sign of any change in the trend, Koomar said.

Maneesh Sharma, AVP - Commodities & Currencies, Anand Rathi Shares & Stock Brokers, noted that the sharp moves in precious metals seen today reflected speculation that Warsh may be less enthusiastic to cut rates than other candidates, given his past warnings of inflation risks and more recent calls for the Fed to reduce its balance sheet.

“Going ahead markets could now look ahead to more cues from labor market reports due next week in US which could show signs of weakening labor markets, while local markets could remain glued towards Union budget announcement due on Sunday. Any signs of changes in Import duty structure could reflect directly into MCX prices. Overall volatility with a corrective bias is expected to persist for few more sessions before markets stabilize at lower levels,” Sharma added.

Also read: Gold, silver ETFs crash up to 24% as precious metals tumble further from record highs