Is the gold rally over? What about silver? Is it a good time to invest?

Gold has been on a massive run lately.

The precious metal has delivered massive returns for investors over the past few years, arguably better than even equity and properties in the long term.

Many analysts continue to view gold as an excellent diversification tool and a hedge against the markets. However, recent developments have left some wondering if the gold run is over and if the market froth has subsided.

But what happened? Is the gold rally over? What about silver? Is it a good time to invest?

What happened and why?

The price of spot gold, under which the precious metal is sold at the current market price, fell below the key $4,000 (Rs 3.53 lakh) level on Monday. On Tuesday, spot gold declined once again, trading at $3,986 (Rs 3,51,604).

Meanwhile, gold futures also suffered. On the Multi Commodity Exchange (MCX), gold futures for December delivery dropped by Rs 1,546, or 1.25 per cent, to Rs 1,21,905 per 10 grams. The yellow metal lost Rs 3,557, or 2.80 per cent, during the holiday-shortened week.

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On Tuesday, Comex gold futures dropped by 6.11 per cent – the biggest loss in a decade. US gold futures also decreased 2.48 per cent to $3,919.21 (Rs 3,46,045) on Tuesday, a seven per cent loss in a week.

This comes just weeks after gold touched an all-time high on October 17 when gold hit Rs 1,32,294 per 10 grams and silver touched Rs 1,70,415 per kilo.

Silver suffered even more damage, losing eight per cent in a single day – the biggest decline since 2021. Silver futures also witnessed steep losses on the MCX on Monday. The white metal for December delivery plummeted by Rs 1,964, or 1.33 per cent, to Rs 1,45,506 per kilogram. This followed a decline of Rs 9,134, or 5.83 per cent, over the past week. The white metal had also seen sustained highs in both the international and domestic markets over the past week.

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Why did this happen?

These developments came as the United States and China said they had reached a trade framework ahead of the meeting between US President Donald Trump and Chinese President Xi Jinping on October 30 – news which weighed heavily on some minds.

Experts also said gold fell as a result of a stronger US dollar and because investors were looking to book profits after a record-breaking run. The metal has performed extremely well during times of turbulence.

“Gold prices closed negative for the first time in ten trading weeks, on profit-booking at recent tops, weakening physical demand in Asian centres like India and China, and further weighed by a stronger US dollar,” Pranav Mer, Vice President, EBG, Commodity & Currency Research, JM Financial Services Ltd, said.

“Gold witnessed its sharpest one-day decline in over a decade this week, retreating more than 6 per cent as investors booked profits following a prolonged record-setting rally,” Riya Singh, Research Analyst at Emkay Global Financial Services, added.

Investors are also looking to see what the US Federal Reserve will do.

“The sharp reversal is due to months of speculative positioning tied to expectations of deeper rate cuts by the Fed and concerns about fiscal weakness,” Singh added.

There are also other domestic considerations. As CA Foram Naik Sheth, KMP, Wealth Management Solutions, NPV Associates LLP, told Times of India, “Domestically, the end of the festive season, a slightly stronger rupee, and reduced gold purchases by the RBI have contributed to the decline.”

Is it a good time to invest?

Some think it is.

Singh said the macroeconomic factors – the massive US deficit, central banks moving away from the dollar, and continued geopolitical issues – are in gold’s favour in the long term.

“Despite the steep correction, the broader outlook for gold remains bullish,” Singh said.

Singh also remained upbeat about silver. “Silver’s fundamental outlook remains robust, supported by rising industrial demand from the solar photovoltaic and electric vehicle sectors,” she said.

Darshan Desai of Aspect Bullion & Refinery warned that investors considering gold as a hedge should prepare for short-term volatility and sharp price swings. Positive news on the trade deal or further gains in the US dollar could prompt even further profit-booking.

Jigar Trivedi of Reliance Securities added that traders are also focused on major central bank decisions this week, with the Federal Reserve widely expected to cut rates by 25 basis points after softer-than-expected inflation data, while the European Central Bank and the Bank of Japan are likely to keep policy rates steady.

It ultimately depends on your portfolio, risk appetite, and whether you are willing to stick it out in the long term.

With inputs from agencies