From record highs to correction: What's next for gold and silver?

Disclaimer: This article is written by Navneet Damani, Head of Research – Commodities, Motilal Oswal Financial Services. Views expressed are his own. Readers' discretion is advised.

 

Gold and silver approach the pre-Diwali period after a sharp reversal from their January highs, leaving investors to weigh whether the recent decline is a pause in a larger bull market or the start of a deeper correction. The fall reflects more than routine profit-taking. Changing expectations for US interest rates, elevated oil prices and portfolio-wide selling have made the outlook for precious metals less certain. 

The late-October sell-off in technology shares has had mixed implications for bullion. The Nasdaq fell about 2.9 per cent as investors questioned the scale and likely returns of artificial-intelligence investment. Equity weakness would normally encourage safe-haven buying in gold. This time, however, pressure to raise cash and meet margin requirements appears to have spilled over into precious metals, prompting investors to sell assets that had delivered strong gains. Treasury yields eased at points as investors sought safety, but the benefit to gold was outweighed by liquidation and concerns that monetary policy may remain restrictive. 

Inflation and interest rates remain central headwinds. Higher oil prices, amid renewed concerns over supplies through the Strait of Hormuz, and stronger US inflation readings have increased speculation about another Federal Reserve rate increase in December. The Fed held its policy rate at 3.75 per cent–4 per cent on October 28, but two officials dissented in favour of an immediate hike. That split underscored how uncertain the policy outlook has become. Meanwhile, the latest 30-year US Treasury auction cleared at a yield of 5.618 per cent, highlighting the income available from government bonds compared with non-yielding gold. If the dollar and yields stay firm, bullion rallies may struggle to gain traction. 

The correction does not, by itself, confirm a trend reversal. A sharp rise in asset prices can leave investors exposed to crowded positions, and tighter liquidity or a need to reduce risk can trigger profit-taking across commodities. Even so, gold retains longer-term support from geopolitical tensions, central-bank diversification and concerns about fiscal sustainability. India’s festive and wedding-season demand could also lend support to domestic prices, although local premiums and the rupee will influence how global moves translate into Indian markets. 

Silver has both investment and industrial drivers. The Silver Institute expects the market to record a sixth consecutive annual deficit in 2026, a structural factor that can underpin prices. However, it also expects industrial fabrication to decline, partly because manufacturers are using less silver per solar panel and substituting other materials. A supply deficit can support the market over time, but it cannot prevent a correction when investment demand weakens or holders liquidate positions.

The broader US fiscal picture adds another layer to the outlook. Higher inflation and borrowing costs are arriving alongside rising government debt. Persistently expensive financing could constrain activity in an economy growing at a moderate pace, while also raising questions about the long-term sustainability of public finances. This creates competing effects for precious metals: high yields can weigh on gold in the near term, while concerns about debt and confidence in currencies may strengthen its strategic appeal over a longer horizon. 

Volatility is likely to remain elevated around the US midterms, oil prices and upcoming inflation data. A break below $3,800–3,900 in gold or $47 in silver could open the door to further losses; these are levels to monitor, not guaranteed floors. If selling pressure fades and rate expectations soften, gold could recover towards $4,100–4,200 and silver towards $52–55. For Indian investors, currency moves and local premiums may amplify or cushion the global change. Staggered buying is therefore more prudent than trying to identify an exact bottom.