On the Multi Commodity Exchange (MCX), February gold futures dropped by over Rs 10,000, or nearly 6 percent, to around Rs 1,59,250 per 10 grams. Silver prices also witnessed heavy selling, with March futures tumbling close to Rs 24,000, or 6 percent, to Rs 3,75,900 per kg.
The decline mirrored weakness in global bullion markets, where prices came under pressure due to a stronger dollar. A firmer greenback makes dollar-denominated metals costlier for holders of other currencies, dampening demand.
The dollar index climbed nearly 0.50 percent after US President Donald Trump and Democratic leaders reached an agreement to avoid a partial government shutdown. The US Federal Reserve’s decision to maintain interest rates further supported the currency.
Despite the correction, gold has recorded strong gains this year, rising more than 24 percent in January. According to Reuters, the metal is on track for its sixth consecutive monthly increase and its biggest monthly rise since January 1980. Silver has surged even more sharply, gaining about 62 percent this month and heading towards its best-ever monthly performance.
Market analysts caution that the steep rally in precious metals has increased the risk of demand fatigue, leaving prices vulnerable to sharp corrections if triggered by adverse developments.
Although supportive factors such as expectations of interest-rate cuts, geopolitical and geo-economic uncertainties, and strong retail demand remain intact, intermittent profit booking could lead to continued volatility.
Experts expect both gold and silver to remain volatile in the near term amid fluctuations in the dollar index, the upcoming Indian Union Budget and ongoing geopolitical tensions.