Gold, silver tumble up to 44% from January peaks. Is it time to buy the dip or stay cautious?
The corrections in gold and silver from their January 29-peaks extended to 22% and 44%, respectively, before rebounding slightly leaving investors wondering if the precious metals lost their charm or is this correction an opportunity to invest more? Here is what an expert says, as reported by ETWealth.
Gold and silver saw a spectacular rally in 2024 and 2025, helping shield investor portfolios from market dislocations triggered by tariff wars and regional conflicts. Both precious metals initially seemed to benefit from the rising “geopolitical risk premium” embedded into their prices.
The geopolitical risk premium has not faded. But emerging macro conditions are now proving a bitter pill, along with the liquidation of hot money. Specifically, the US Treasury yield is weighing on gold and silver prices. As the conflict in West Asia rages on, disruptions to oil supplies have pushed prices higher. This has stoked inflation concerns, prompting markets to reassess expectations for rate cuts. This has led to a spike in US Treasury yields and is pushing the dollar higher. Both are negative for gold and silver.
“While geopolitical developments typically support safe-haven demand, the recent event appears to have triggered near-term unwinding in gold positions, likely driven by liquidity needs and asset rotation,” said Siddharth Srivastava, Head-ETF Product & Fund Manager, Mirae Asset Investment Managers (India).
Both gold and silver are typically used as diversifiers in investors’ portfolios. Their low correlation with equities often provides a buffer against market volatility. Now, if portfolio diversifiers are not immune to extreme uncertainty, does the asset allocation argument fall apart?
Anish Teli, Managing Partner at QED Capital Advisors, insists that gold shows low correlation in the long term, but not during extreme stress. “Usually, gold is a safe haven during economic stress, but the context matters—how bad the stress is and what is driving it,” he says.
The correction is a reality check for investors in gold and silver ETFs and funds. Existing investors must remain calm and not lose faith in asset allocation. Experts favour gold ahead of silver, but neither is cheap even after the correction.
Sahil Kapoor, Head of Product and Market Strategist at DSP Mutual Fund, asserts, “Most investors are better off only in gold.” Kapoor advises that investors should continue systematic investment plans (SIPs) in gold, but not silver, as it is not a monetary asset.
