Harshal Dasani, Business Head at INVasset PMSsaid that the current gyrations in gold and silver signal that we are near intermediate bottoms, and not cycle tops. His conviction on the precious metals stems from fundamentally-driven factors like central bank buying, suppressed real interest rates and the industrial demand for silver.
Despite the sharp drawdowns seen in gold and silver rates since the end of January, Dasani expects gold prices to touch $6,000 by Dec-end and silver to scale $150 peak. Edited excerpts:
How should investors read the gyrations in silver and gold prices? Was the latest rise a dead-cat bounce?
The recent rebound in gold and silver should not be read through the lens of a “dead-cat bounce.” The sharp fall preceding it was not driven by a deterioration in fundamentals but by a classic liquidity and positioning shock. Over the past few weeks, both COMEX and Shanghai raised margins aggressively, triggering forced liquidation of leveraged long positions, particularly in silver. Such margin-led flushes tend to compress price moves into a short window, creating the illusion of a structural breakdown. Historically, in secular bullion bull phases, these events have acted more as position resets than trend reversals.
What is crucial is that while paper prices corrected sharply, physical market signals never confirmed stress. Inventory drawdowns in Asia continued, premiums in key consuming markets remained firm, and central bank demand for gold showed no sign of easing. This divergence between paper liquidation and physical absorption is typically observed near intermediate bottoms, not cycle tops.
While near-term volatility may persist, the price action is more consistent with the early stages of another leg within a broader uptrend rather than a reflex bounce set to fade.
Gold signals fear, silver signals growth — with both rising together, what is the market really pricing in?
The idea that gold rises only in fear while silver rises purely during economic optimism is increasingly outdated. While silver has long been classified as an industrial metal, the current cycle reflects a structural re-monetisation of silver. Large consuming economies are beginning to treat silver less as a commodity input and more as a strategic asset alongside gold.
This coexistence is not new. Historically, during all three major secular precious-metal bull runs, gold and silver have moved together. In the 1970s bull market, triggered after Richard Nixon ended the gold standard, both metals rallied sharply as confidence in fiat currencies weakened. A similar pattern unfolded during the 2000–2010 cycle, driven by global monetary easing, balance-sheet expansion, and falling real interest rates. The current phase closely mirrors those periods.
What distinguishes this cycle is the breadth of global gold buying. When both metals rise together, markets are not pricing a simple growth or fear narrative—they are responding to deepening monetary uncertainty and declining trust in paper assets, a hallmark of every major bullion bull market.
Gold and silver ETFs amplify volatility — how should investors navigate them without getting whipsawed?
Gold and silver ETFs have become the preferred entry point for investors, but in the current cycle, they are also amplifying volatility. The reason lies in how ETFs function.
Price discovery in ETFs is increasingly driven by financial flows rather than physical demand, making them behave like high-beta instruments during periods of stress. Globally, gold ETFs have seen strong inflows over recent months, taking total holdings close to historic highs, while silver ETFs have experienced sharp bursts of retail-led inflows over short periods. Such concentrated inflows tend to exaggerate both rallies and drawdowns.
The key for investors is to treat ETFs as allocation tools, not trading instruments. Position sizing matters far more than timing. Staggered investments, disciplined rebalancing, and avoiding leverage are essential. Investors should also monitor tracking error, bid–ask spreads, and premium or discount to NAV during volatile phases. ETFs offer efficiency and liquidity, but in stressed markets, they magnify emotions.
What is the ideal way to allocate to gold and silver — MCX, digital gold, ETFs, or physical buying?
The choice between MCX, digital gold, ETFs, and physical buying should be guided by purpose, especially in the current phase of heightened volatility. The sharp surge in gold and silver prices has increased short-term swings, making leveraged derivative contracts on MCX riskier for most investors. Futures are suitable only for those who understand margin dynamics and can manage sharp drawdowns; otherwise, leverage can quickly magnify losses.
For allocation, ETFs and physical buying are more appropriate. ETFs offer liquidity and ease, while physical gold and silver serve as long-term stores of value, insulated from daily trading noise.
Gold–silver ratio has compressed from 105 to 60—does silver still offer value, or is the easy money over?
The compression in the gold–silver ratio from above 100 to around 60 does not mean the silver opportunity is over; it signals a cool-off after a powerful re-rating. The ratio had briefly dipped toward the mid-40s, a zone historically associated with periods of intense silver demand, before the recent correction in silver prices led to a rebound in the ratio. Such mean reversions are common after sharp moves and should not be mistaken for trend exhaustion.
Structurally, silver continues to look undervalued relative to gold. Gold largely remains in storage, acting as a monetary reserve and balance-sheet hedge. Silver, in contrast, is consumed and effectively disappears through industrial use making its supply dynamics far tighter over time. This distinction is often overlooked.
The mismatch becomes clearer when viewed against production realities. The global mining ratio is roughly 1:7 (one ounce of gold produced for every seven ounces of silver), yet the price ratio remains near 1:60. That gap suggests silver still carries embedded value. Periodic pullbacks in the ratio should be seen as consolidation phases within a broader structural adjustment, not the end of the silver trade.
What is your 12-month outlook for gold and silver? Is the best phase of the rally behind us?
Gold is poised to continue its upward trajectory over the next 12 months, primarily driven by China’s aggressive gold accumulation and its strategic shift towards replacing US Treasury bills in its reserves. This move, coupled with the weakening dollar amid ongoing geopolitical risks and global monetary easing, will likely propel gold towards the $6,000 per ounce mark. Central banks will maintain their buying pace as a hedge against fiat instability. Real rates are expected to stay suppressed, further supporting gold’s appeal as a store of value amid inflationary pressures and monetary uncertainty.
Silver remains highly bullish, fueled by a global physical shortage and the growing demand from industries like solar energy and electronics, which are placing increasing pressure on supply. The silver market is further complicated by paper shorts, which add to the volatility but ultimately reflect a deeper market imbalance. As a result, silver’s dual role as both a precious metal and an industrial commodity will likely push prices toward $150 per ounce. This reflects a combination of strong industrial demand, monetary hedge appeal, and ongoing supply constraints, making silver one of the most compelling trades in the metals space.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
