‘Heavy Liquidation, Overbought Conditions’: What Triggered the Crash in Gold and Silver Prices?

Gold and silver prices witnessed a sharp decline in the national capital on Friday as investors rushed to book profits amid weak global cues and a rebound in the US dollar.

According to news agency PTI, gold of 99.9 per cent purity plunged by ₹14,000, or 7.65 per cent, to ₹1,69,000 per 10 grams (inclusive of all taxes). The precious metal had touched a record high of ₹1,83,000 per 10 grams on Thursday after surging by ₹12,000.

Silver also saw heavy losses, falling by ₹20,000, or nearly 5 per cent, to ₹3,84,500 per kilogram (inclusive of all taxes). The white metal had jumped ₹19,500 in the previous session to reach an all-time high of ₹4,04,500 per kg.

Why did gold and silver prices fall?

Commodity analysts said the decline was driven largely by aggressive profit-booking after a strong rally.

HDFC Securities’ Senior Commodities Analyst Saumil Gandhi said gold and silver underwent a major correction as investors moved to liquidate long positions and secure gains following multiple sessions of record-breaking prices.

“This decline was mainly fuelled by heavy liquidation by large institutional players after a strong multi-session advance,” Gandhi told PTI.

He added that a recovery in the US dollar further weighed on bullion prices.

From a technical perspective, both metals had been trading in overbought territory in recent sessions, increasing the likelihood of a correction. According to Gandhi, the combination of stretched technical indicators, institutional profit-taking, and a strengthening dollar is likely to keep pressure on bullion in the near term.

Global market trends

In the international market, spot gold was trading 5.31 per cent, or $285.30, lower at $5,087.73 per ounce. During intraday trade, it fell by $425.86, or 7.92 per cent, to a low of $4,945.26 per ounce.

Gold had earlier touched a new record of $5,595.02 before settling at $5,371.12 per ounce.

Spot silver also declined sharply, dropping $14, or 12.09 per cent, to $101.47 per ounce. It had fallen as much as 17.5 per cent intraday to $95.26 per ounce. On Thursday, silver had hit a fresh peak of $121.45 per ounce.