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Gold plunges by 20% and Silver by 45%. What next?- AUGMONT BULLION REPORT
3,563-carat ‘Star of Pure Land’ features rare six-ray asterism; valuations reportedly reach up to $400 million.
The precious metals market has seen extreme volatility. Gold has plunged nearly 20%, and silver has declined about 45% within just three days, wiping out most of the year-to-date gains. Such a sharp correction is rare and reflects the risks of crowded trades in fast-moving markets.
Over the past year, gold and silver surged to record highs, surprising even experienced market participants. The rally intensified in January as investors sought protection amid geopolitical uncertainty, concerns over currency debasement, and questions around the Federal Reserve’s independence. Strong speculative buying, particularly from China, further amplified the move.
Key factors behind the sharp correction:
- Overcrowded and overbought conditions
Market positioning had become stretched, with record speculative long positions, strong ETF inflows, increased retail participation, and overextended technical indicators. Silver was especially vulnerable due to thinner liquidity and higher leverage. Once prices turned, stop-loss selling and forced liquidation accelerated the decline, with no clear price floor initially visible.
- Nomination of a new Fed Chair
President Trump nominated former Federal Reserve Governor Kevin Warsh to succeed Jerome Powell. While rate cuts remain possible, Warsh is viewed as less dovish than markets had anticipated. His emphasis on inflation control and scepticism toward aggressive quantitative easing supported the US dollar, which weighed on gold prices.
- Disconnect between paper and physical markets.
A significant divergence has emerged between paper prices and physical availability, especially in silver. Several global mints-imposed sales limits or suspensions, the US Mint halted silver product sales, and delivery delays were reported across key markets, including India. Rising lease rates further point to tight physical supply, even as paper prices corrected sharply.
- Margin pressure at exchanges
Major exchanges, led by CME, raised margin requirements on gold and silver futures in response to heightened volatility. Higher margins increased the cost of holding leveraged positions, forcing liquidations. Historically, such margin hikes tend to reset market positioning rather than end long-term bull trends.
Overall, the recent sell-off reflects structural liquidity stress rather than a sudden deterioration in fundamentals. While paper-market prices declined sharply due to forced selling, elevated physical premiums signal ongoing tight supply and highlight the growing divide between financial trading and physical metal ownership.
Looking ahead, market focus will remain on geopolitical developments between the US and Iran, along with key US economic indicators, particularly the ISM Manufacturing PMI and Nonfarm Payrolls.
Historically, periods of strong momentum are often accompanied by sharp but temporary volatility. While recent price action has disrupted short-term technical charts, the long-term trend remains constructive. This suggests the current correction is likely a typical “shake-out” within an ongoing long-term bull market for precious metals.
Gold prices are expected to fall by 3-4% and take support around $4320–4300 (~ Rs 133,000-135,000) zone and stabilise at those levels. These dips should be used as a buying opportunity to accumulate atleast 50% of the investment amount for the long-term. On the upside, any rebound is likely to face immediate resistance near the $4,750–4,800 zone.
The precious metals market has seen extreme volatility. Gold has plunged nearly 20%, and silver has declined about 45% within just three days, wiping out most of the year-to-date gains. Such a sharp correction is rare and reflects the risks of crowded trades in fast-moving markets.
Over the past year, gold and silver surged to record highs, surprising even experienced market participants. The rally intensified in January as investors sought protection amid geopolitical uncertainty, concerns over currency debasement, and questions around the Federal Reserve’s independence. Strong speculative buying, particularly from China, further amplified the move.
Source: AUGMONT BULLION REPORT
International News
Geopolitical Flashpoints and Macro Crosswinds Keep Bullion Markets In Check AUGMONT BULLION REPORT
Gold Increasingly Rivaling US Treasuries As A Preferred Reserve Asset For Central Banks Globally, For The First Time In Decades
Gold prices slipped below $4,700 and silver below $80, retracing a portion of last week’s gains after President Trump publicly rejected Iran’s diplomatic response as “TOTALLY UNACCEPTABLE,” keeping inflationary concerns elevated. Tehran had proposed relocating part of its highly enriched uranium stockpile to a third country while refusing to dismantle its nuclear infrastructure — a position Washington found insufficient.
Geopolitical conditions deteriorated further over the weekend, with renewed cross-border attacks threatening to unravel the fragile ceasefire established in early April. US Central Command confirmed that American forces intercepted Iranian strikes and conducted defensive operations, while guided missile destroyers transited the Strait of Hormuz. The US subsequently reported sinking several Iranian vessels in the strait on Monday, as Iran escalated with fresh missile and drone strikes against the UAE. The Strait of Hormuz remains effectively closed, sustaining elevated energy prices and amplifying inflation risk globally.
Persistent inflationary pressure has reinforced expectations that central banks may tighten policy further — a headwind that typically weighs on precious metals. The April NFP report, released May 8, delivered a significant upside surprise: 177,000 jobs added against a consensus of 65,000, though below March’s 185,000, signaling a gradual cooling trajectory. The unemployment rate held at 4.3%. Rate cut expectations have shifted to late 2027 or early 2028, limiting dollar weakness and capping gold’s near-term upside.
On the USDINR front, currency markets were highly volatile, driven by crude oil dynamics. The rupee depreciated to record lows near 95.2 per dollar on May 7 following a 6% crude oil surge after Iran’s military escalation and a strike on a UAE oil facility. The move constrained capital inflows and triggered a surge in importer hedging activity. India’s physical gold demand has weakened sharply. Imports declined from approximately 100 tonnes in January to 65–66 tonnes in February, fell further to 20–22 tonnes in March, and are estimated at just 15 tonnes in April — among the lowest monthly readings in decades outside the Covid period.
Sentiment last week reflected a tug-of-war between safe-haven demand and the hawkish overlay from elevated energy prices. Analytically, the most notable shift in the pre-NFP environment is a structural repricing of gold: the metal has transitioned from a data-reactive asset to one driven by fiscal sustainability, monetary policy credibility, and sovereign reserve allocation. While Fed hawkishness remains a short-term constraint, 2026 has been defined by what analysts are calling “The Great Bullion Pivot” — gold increasingly rivaling US Treasuries as a preferred reserve asset for central banks globally, for the first time in decades.
Gold has been trading within a $4,500–$4,750 range (approximately ₹148K–₹154K). Having tested the upper boundary last week, profit-booking pressure may push prices back toward the lower end this week. Silver has been ranging between $71–$82 (approximately ₹235K–₹265K), and similarly, having touched the top of its range, a reversion toward support levels is likely in the near term.
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