Gold prices experienced a notable decline on Wednesday, December 31, as MCX gold futures dropped ₹1,140 or 0.8% from their previous close, highlighting the volatile nature of precious metals trading amid shifting global dynamics. The retreat came after a period of sharp volatility triggered by multiple geopolitical developments that had initially boosted safe-haven demand.

Price Movement and Market Dynamics

The domestic gold market saw significant movement as detailed in the following table:

Gold and silver had rebounded strongly on Tuesday from intraday lows due to renewed safe-haven demand. The sentiment was driven by multiple geopolitical factors including setbacks in the Russia-Ukraine peace process, U.S. strikes on Venezuelan dockyards, and Chinese naval drills amid rising U.S.-Taiwan friction.

Federal Reserve Policy Impact

Rahul Kalantri, VP Commodities at Mehta Equities, noted that the rally was capped following the Federal Reserve's policy meeting minutes, which indicated reduced expectations of aggressive rate cuts in 2026. This monetary policy shift has created a more complex environment for precious metals, balancing geopolitical support against potential headwinds from interest rate expectations.

Technical Analysis and Support Levels

According to Ponmudi R, CEO of Enrich Money, technical indicators continue to suggest underlying strength despite the recent decline:

The analysis indicates that while short-term price action remains under pressure, the broader structure is still viewed as bullish. Technicals continue to favor buy-on-dip strategies, though short-term movements remain sensitive to global developments.

Long-term Outlook and Projections

Analysts maintain a constructive view on gold's prospects for 2026. Mahendra Luniya, Chairman of Vighnaharta Gold, provided specific targets for the precious metal:

With global uncertainties and monetary policy expectations still evolving, the precious metals market remains finely balanced heading into the new year. Price action may remain range-bound in the near term, with traders closely monitoring shifts in geopolitical developments and central bank policy narratives that could influence the next directional move in gold prices.

Silver prices experienced a dramatic correction this week, with MCX futures plunging approximately ₹22,000 in just three days. The precious metal, which had delivered over 160% returns in 2024, faced intense selling pressure as traders engaged in widespread profit booking following a spectacular rally that exceeded most bullish expectations.

Sharp Price Decline Across Platforms

The correction was swift and severe across multiple platforms. On the commodity exchange MCX, silver prices crashed from Monday's peak to significant lows, while the morning session opened with a brutal 6% slide. The selloff extended beyond futures markets, with exchange-traded funds bearing the brunt of the decline.

Key Factors Behind the Correction

Analysts identified several structural and technical factors that contributed to the sharp decline. CME Group's decision to raise margin requirements on silver futures emerged as a primary catalyst, forcing leveraged traders into hasty exits as positions became technically overstretched.

Ajay Kedia of Kedia Commodities explained the structural trigger: "CME has raised the margin on both gold and silver. Because of that, we saw some profit booking triggered yesterday." He noted that the correction was technically overdue, stating: "Technically, the market was severely overbought. We were anticipating this kind of profit booking."

Holiday-thinned liquidity amplified the price swings, with volumes remaining depressed through the year-end period. "Volumes are very low as of now because of the holiday mood. Until January 5, we can expect this type of volatility in the market," Kedia observed.

Market Analysis and Outlook

Ponmudi R, CEO of Enrich Money, highlighted multiple contributing factors: "The correction has been driven primarily by CME margin hikes, forced deleveraging, year-end tax harvesting, and thin liquidity conditions, keeping near-term sentiment cautious despite the intact broader trend."

Despite the brutal correction, market veterans maintain that the broader bullish structure remains intact. Ponmudi emphasized: "Such pullbacks are typical of strong bull markets and often serve as healthy resets by flushing out excess leverage. As long as key support levels hold, the medium- to long-term outlook remains constructive."

Kedia revealed that silver's meteoric rise had exceeded bullish expectations: "For silver, frankly we were expecting the $75 to $80 level in the next couple of years but that target has been achieved in a single year."

Technical Levels and Support Factors

Analysts provided specific technical levels for traders to monitor. Rahul Kalantri, VP Commodities at Mehta Equities, outlined key price ranges for both international and domestic markets.

Ponmudi identified critical technical markers: "As long as $70.40 holds, the trend remains corrective rather than bearish. A break below $70.40 could trigger a short-term reversal toward $65, while a decisive move above $78.67 would invalidate the bearish setup."

Jigar Trivedi, Senior Research Analyst at Reliance Securities, emphasized structural support factors: "Despite near-term volatility, silver continues to find support from structural supply constraints and strong industrial demand, particularly from solar, electronics, and data center infrastructure."

Market Evolution and Future Expectations

Ponmudi provided context on how dramatically silver markets have evolved: "During the 2015-2019-2020 period, silver's domestic base price zone was near ₹33,000 per kg. Today, silver is operating in a markedly different market regime, characterised by deep global participation via ETFs, derivatives, algorithmic trading, and instant market access."

For MCX Silver futures, currently trading near ₹2,37,000–₹2,38,000, analysts see potential for recovery. Ponmudi noted that a sustained rebound above ₹2,36,000 could potentially trigger fresh upside toward ₹2,45,000–₹2,60,000 over the medium term.

The consensus among analysts suggests this week's correction represents forced profit-booking rather than a fundamental breakdown in the underlying trend, with declines expected to attract buying interest rather than signal a complete reversal.