Gold and Silver Prices Plummet Amid Hawkish Fed Stance

Gold and silver have seen a significant correction in their prices over the past few months. From their peak on January 29, gold has fallen by nearly 20%, from Rs.1,75,000 per 10 gm to Rs.1,41,800 per 10 gm. Silver has taken an even bigger hit, with its price falling by 45% from Rs.3,96,000 per kg to Rs.2,19,500 per kg.

According to experts, the correction is not just a case of mean reversion in prices, but rather a rates-driven repricing due to the Federal Reserve's hawkish stance and rising real yields. Chirag Mehta, Chief Investment Officer at Quantum Mutual Fund, notes that profit booking and rebalancing of portfolios amid stress on other assets have also contributed to the pullback.

However, despite the correction, most experts maintain that the long-term thesis for gold and silver is still intact. The recent repricing has simply normalized prices after a record run. Ashwin Patni, Head of Wealth Management Solutions at Julius Baer India, emphasizes that even with the large correction seen between February and July this year, gold prices remain up over a one-year period and significantly up over 3- and 5-year periods.

Experts predict that the next leg of the precious metals' journey will be driven less by momentum and more by fundamentals. A moderation in monetary policy and easing real yields could provide the catalyst for renewed investment flows, while structural demand remains intact. Varun Fatehpuria, CEO at Daulat Wealth Management, believes that continued central bank buying, reserve diversification, and any moderation in real yields could provide a strong foundation for renewed upside.