Gold and Silver: Is the recent crash a good chance to buy?

Synopsis: Precious metals are all over the place right now, as after a big crash, silver’s down more than 44 percent from its high, and gold isn’t looking much steadier. So, what to do? Is it time to jump in and buy the dip, or is it smarter to wait things out?

Silver prices have fallen sharply in recent weeks. On the Multi Commodity Exchange of India (MCX), silver reached a high of Rs 4,20,048 per kg but is now trading around Rs 2,33,774 per kg, a staggering drop of over 44 percent. 

Gold, on the other hand, reached a high of Rs 1,80,779 per 10 grams but is now trading around Rs 1,38,888 per 10 grams, which is a staggering drop of over 23 percent. This steep decline makes investors consider whether it’s time to buy.

After both Gold and Silver rose due to global uncertainty, central bank buying, and investor interest, Gold has seen some increased volatility in its prices. However, rapid price increases often lead to sharp corrections as traders take profits and speculative positions unwind.

Analyst Comments

Market experts caution that big crashes don’t mean prices have hit rock bottom. S Naren from ICICI Prudential AMC advises investors to be careful with assets that double (100 percent) in a year. Silver has provided such large returns recently, making it more vulnerable to significant corrections. He noted that predicting short-term movements in commodities like gold and silver is very challenging.

Silver is known for its high volatility as it responds to safe-haven demand like gold, as well as industrial demand and speculative trading, and this combination results in sharper price swings. A recent drop of 37 percent in a single global session illustrated how quickly market sentiment can shift.

Although gold serves as a traditional safeguard against inflation and geopolitical risks, it can also correct when the US dollar strengthens, or expectations around interest rates shift. However, both metals may remain volatile for now.

So, should Gold & Silver be avoided?

The answer isn’t to avoid them completely. Unlike equities and many other assets, gold and silver can act as effective hedges against inflation and global uncertainties. However, while they offer protection, investors should avoid allocating an excessively large portion of their portfolio to precious metals.

Experts recommend avoiding large lump-sum investments after such steep declines. Instead, consider gradually increasing exposure to gold and silver or investing in diversified multi-asset funds, where precious metals make up a small part of the portfolio. This strategy lowers the risk of mistiming the market.

In short, while the recent crash may seem like a chance to buy, it also brings a higher risk. A gradual and diversified approach is a safer way to invest in gold and silver without exposing yourself to too much volatility risk.

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