Editor’s Note
The recent volatility in precious metals markets has unsettled many investors. This analysis suggests the downturn may have cleared speculative excess, bringing prices closer to fundamental values. While a recovery is anticipated, it is expected to be gradual, hinging on key macroeconomic factors. Investors are advised to maintain a long-term perspective.
The recent sharp decline in gold and silver prices has troubled investors, but economist Sharad Kohli attributes this to speculation. According to him, the speculative froth has now been removed from the market, and prices are closer to their real value. The dollar index, global tensions, and central bank holdings will determine the future recovery. Kohli believes gold and silver could stabilize again within 2 to 6 months, so patience is essential.
In an interview with News18, expert economist Sharad Kohli provided an analysis of this decline that clarifies the picture rather than creating fear. He says what happened in the market was sudden but not meaningless.
According to Sharad Kohli, gold had recently reached around ₹180,000 per 10 grams and silver had crossed ₹420,000 per kilogram. Subsequently, a single shock saw a drop of about $1,000 in gold and approximately ₹40,000 in silver. Kohli considers this the biggest decline since 1980, but he also clarifies that this does not mean an endless decline is coming.
Kohli does not make a direct prediction of a specific minimum level but does give indications. He says if prices hold at current levels for a few days, then understand that the market has found its real value. After that, the path to recovery will gradually open. This recovery may not happen in a week or a month, but could take from 2–3 months up to 6 months.
Kohli repeatedly emphasizes the role of the dollar index in this entire story. He says that when the dollar index slipped from 98 to near 96, a strong rally was seen in gold and silver. But as soon as efforts to show the dollar’s strength began in the US, the market sentiment reversed. Kohli makes an interesting comparison, saying,
According to him, if the dollar index falls below 97–96, gold and silver will start moving upwards again.
He mentioned US policies, explaining that discussions related to the Trump administration and the Federal Reserve created panic among speculators. Speculation over names following Jerome Powell and news of strong dollar supporters like Kevin Warsh pushed the market into a selling spree. The impact of this anxiety was directly visible on the COMEX exchange, where large-scale contract liquidations occurred during the monthly contract expiry in late January. Kohli explains that where contracts were previously being rolled over, sudden selling began and a domino effect was created. In silver, the situation was such that hundreds of speculative contracts were running per kilogram, far exceeding real demand.
Kohli believes that after this decline, the speculative portion has largely exited the market, and the remaining price reflects the real value. This is where the foundation for stability and then recovery will be laid. As factors strengthening this recovery, he mentions geopolitical tensions. Harsh rhetoric between Iran and the US, the harsh winter picture of the Russia-Ukraine war, and ongoing talks in West Asia – all these situations make gold and silver a safe investment. Kohli reminds that such “mood indexes” and global tensions have pushed the market up before.
As the strongest signal, he points to the behavior of central banks. He says that the world’s major central banks, which are the biggest buyers of gold, did not sell their holdings during this decline. This holding by ETFs and central banks is a signal of confidence for the market that the decline is temporary, not permanent.
Pre-budget discussions in India, weekend rumors, and political statements also weakened sentiment to some extent, but Kohli considers this a temporary effect. His advice for investors is straightforward – those who bought at high prices should not panic and sell at a loss. It is better to lock the investment away and give it 2 to 6 months rather than checking prices daily. In his view, the dollar index, global tensions, and real demand will determine the future direction.