Gold fever breaks, leaving silver linings for singed investors

Gold has fallen around 24% while silver is down around 47% in US dollars since its peak in late January. The decline is lower in Indian rupee terms, at 17% for gold, partly because of a higher import duty, which made imported gold more expensive. Silver declined 40% in rupee terms.

Mint spoke to several market experts, who attributed the decline in these precious metals to various global factors that had little to do with India.

“Gold is not a share of Reliance that it depends on the performance of Mukesh Ambani,” said Surendra Mehta, of the India Bullion and Jewellers Association (IBJA). Rather, he said, the price of gold changes based on what’s happening in the world economy, geopolitics, the US dollar and interest rates, among other factors. In other words, “it is very difficult to predict gold,” said Mehta.

Unprecedented rally

For several years until last year, gold prices in India had been rising incrementally, pinching consumers who had to buy it for personal use, but otherwise not on the radar of financial investors.

Then last year, gold prices jumped. By July 2025, prices were up 34% over the previous year, and gold crossed the psychologically important threshold of ₹1,00,000 per 10 grams, according to data from the National Stock Exchange of India.

Silver was rising even faster. In 2024, Over 9 months the price of 1 kg of silver rose by a little more than ₹10,000. In early 2025, the price was rising by ₹10,000 within 1-3 months, and after October, it was adding ₹10,000 within 3-4 days. Volatility was high. On some days, it would lose ₹5,000 per kilo in a single trading session.

By mid 2025, both precious metals were hot topics on social media, traditional media and on WhatsApp groups, as everyone tried to figure out when and how to get in on the action.

Market watchers attributed last year’s massive climb in gold prices to central banks worldwide buying it in large quantities to build up their reserves. They said there was also demand from gold consumers, such as jewellery buyers in India and China, two large markets historically.

What really tipped the scales was massive buying of gold by financial investors, largely in the form of exchange-traded funds (ETFs) backed by the physical commodity. Investors bought $89 billion worth of gold ETFs worldwide in 2025, “the largest on record as the gold price delivered its strongest performance since 1979”, according to the World Gold Council.

As gold prices rose, major Wall Street firms, analysts and influencers fanned the flames with predictions of much larger gains. In May 2025, when gold was trading at $ 3,300 per ounce, JP Morgan said it would climb to $6,000 by 2029. Later in the year, as US President Donald Trump caused global economic upheaval by imposing tariffs on countries, uncertainty was running high, as was gold’s outlook. Analysts predicted gold would go to $7,000, $8,000 and even $ 12,000 an ounce. As prices continued to climb, new investors jumped in, driven by “sentiment”.

“When the asset does well, sentiment turns positive and investors tend to buy more” even though the asset has become more expensive, said Manish Banthia, chief investment officer of fixed income at ICICI Prudential Mutual Fund.

Tide turns

Lately, that sentiment has turned the other way. Gold price peaked at $5,405 an ounce on 29 January, fell to a low of $4,001.80 on 25 June. In India, its peak was ₹1,76,274 per 10 grams on 29 January, and it was down to ₹1,39,701 by 25 June.

Analysts say that gold’s recent decline is partly due to expectations that the US Federal Reserve will increase interest rates, which would make US assets such as bonds more attractive. A strong US dollar is also making it more attractive than gold, said Mehta of IBJA. Meanwhile, central banks, which were buying a lot of gold until last year, have reduced their pace of acquisition. “These are the three reasons why gold is declining,” said Mehta.

That in turn is affecting sentiment-driven investors, some of whom are now panicking. “In a falling market, people will sell because there’s always a fear that prices will go down further,” said Mehta.

While gold prices could still go lower, Banthia of ICICI isn’t expecting a crash because he expects that at some point, price-sensitive central banks will start buying gold again. “Does that mean you’ll get a kind of sentiment-driven rally in gold again? That seems unlikely,” he said.

Surprising silver

The downturn in silver has been much sharper, partly because of the larger euphoria around it last year. It has also been much more volatile in daily trading.

The implication of that hit home for Rohit Talwar, a 47-year-old resident of Ahmedabad, when he tried to sell his mother’s silver investment some months ago. Talwar’s mother, on the suggestion of her tenant, had bought two 500-gram silver bars from their local jeweller when the price was around 1,47,000 per kg. Some weeks later, when the price of silver had nearly doubled, Talwar said they approached their local jeweler to sell it. But the jeweler told them it wasn’t possible because the market was very volatile.

This was unexpected, said Talwar, because they had believed physical bars would be easy to sell. For now they are still holding the bars as they don’t need the money, he said. “It has still given good appreciation, but it's meaningless,” he added.

Unlike gold, which has comparatively limited industrial use, silver is utilized to make products like electronic circuit boards and solar panels. However, industrial buyers are price sensitive, and Banthia doesn’t think the silver prices are yet low enough to bring in heavy industrial demand.

Also, short-term investors who bought in during last year's rush are still holding onto their positions and looking for an exit opportunity, Banthia added. At ICICI Prudential Multi-Asset Fund, which has the flexibility to invest in gold and silver, Banthia said they had been bullish on silver back when it traded at a fraction of its current value in 2023-24, the euphoria after last Diwali prompted them to start booking profits and eventually wind down their holdings. “Silver is a high-beta commodity, so one will have to be more careful than in gold,” he said, referring to the high volatility of silver.

Takeaways for investors

The recent rollercoaster ride in precious metals underscores the high risk of trying to chase short-term gains.

“Don’t get carried away by all these narratives,” said Abhishek Kumar, a Sebi-registered investment adviser and founder of SahajMoney in Delhi. Rather, he said, individuals should first check the incentive of someone suggesting that an asset will go up or down. “Is he a related party to say all good things or bad things about it?” he said.

In a typical case of market euphoria, Kumar said, one person makes a projection, the next person exaggerates it, and so on. “It goes the other way, too,” he said, so anyone seeking to make big gains like a trader, should prepare for big losses as well.

Most individuals are best off allocating 5-10% of their overall portfolio to gold, Kumar said. A ₹100 investment portfolio with 10% in gold will fall only 5% if the price of gold is cut in half, he explained. “The asset allocation mix is the savior,” he added. He suggested that unless there is a particular need for the physical commodity, one can invest in gold through financial instruments such as ETFs or mutual funds, which are more liquid.