Gold Steady, Silver Prices See Sharp Correction And Could Decline Further

On Thursday, gold and silver prices declined marginally, imitating the international markets.

On MCX (Multi Commodity Exchange of India) the yellow metal was trading 0.15 percent lower at Rs 50,420 per 10 grams at 11:30 am. In the international market, spot gold was a little changed at $1,877.83 per ounce after a 2 percent fall on Wednesday as a fresh wave of COVID-19 cases in Europe and the US has kept the US dollar at a one-week high. A stronger US dollar puts pressure on gold prices.

As for silver, Wednesday's trade in the international markets grabbed attention with its significant fall of over 3 percent during the session caused the metal to slip below the $24 an ounce level. On Thursday, the metal was trading at $23.44/ounce.

Silver prices in India also slipped below Rs 60,000/kg in trade on Thursday, with silver futures on MCX touching a low of Rs 59,930 per kg.

The road ahead

Technical experts say that silver could see further correction in the short term. However, in the long term, with central banks around the world focusing on flooding markets with liquidity, precious metals may do well.

In its latest commodity report, the World Bank said that it is not expecting to see major gold price movement in 2021 as the market has seen extraordinary gains already in 2020. In the international markets, gold rates are stuck in a consolidation pattern looming near $1,900 an ounce.

World Bank in its October commodity report noted that prices rose 12 percent in the July-September period, its eighth consecutive quarter of gains and touched historical levels.

"Prices are expected to average 27.5% higher in 2020 and remain broadly stable in 2021 as the global economy recovers," it added.

Investors' demand has been more than enough to offset dismal jewelry sales and lackluster interest from central banks it said.

"Gold benefited from its status as a safe-haven asset during the pandemic and was buoyed by continued monetary easing by major central banks," the analysts said. "Long-term real bond yields falling further into negative territory and a weaker U.S. dollar further supported prices."

Despite an impressive performance from gold this year, the World Bank noted that the rally in precious metals markets in the September-ended quarter was led by silver. The report said that silver prices rallied 50 percent between July and September, pushing to a seven-year high above $28 an ounce.

However, the World Bank is not optimistic that silver will maintain the pace seen this year.

"Prices are expected to average nearly 30% higher in 2020, before falling 14% in 2021," the analysts said.