Gold outpaces silver with 5% rally today. What should investors do?

As gold and silver scaled fresh record highs on the MCX on Wednesday, it was the yellow metal that came out on top, outpacing silver’s 2% gain today (January 21). Gold futures expiring February 5 jumped more than 5%, rallying by over Rs 7,700 to scale a new peak of Rs 1,58,339 per 10 grams in the latest bout of safe-haven buying.

This surge comes following the United States (U.S.) Supreme Court decision to postpone any ruling on the legality of President Donald Trump’s trade tariffs, which triggered renewed safe-haven demand for the metal. Geopolitical tensions remained high after Donald Trump issued tariff threats tied to Greenland against European nations, reigniting fears of a renewed trade war.

What are experts saying?

MCX gold continued to track global strength, further supported by persistent weakness in the rupee, which has slipped past the key 91-per-dollar level and is trading in the 91.15–91.35 range.

“The rising channel remains firmly intact, with the ₹1,49,300–₹1,50,300 zone acting as strong dynamic support. Dips are consistently being absorbed, reinforcing the dominance of buyers. A sustained breakout above Rs 1,58,000–Rs 1,59,000 can unlock the next leg toward Rs 1,62,000–Rs 1,65,000. The broader trend remains strongly bullish, with momentum firmly in favour of higher levels,” Ponmudi R, CEO of Enrich Money, said.

“Spot prices are likely to remain volatile yet firm amid fears of a transatlantic trade conflict, Trump’s speech at the World Economic Forum in Davos today, and continued U.S. dollar weakness driven by policy uncertainty. Meanwhile, MCX prices may witness choppier trade ahead of the Union Budget,” Kaynat Chainwala, AVP Commodity Research, Kotak Securities said.

From a fundamental standpoint, Bank of Baroda Securities said that gold prices are likely to remain on an upward trajectory if key conditions continue, including softer demand for the dollar, an accommodative policy environment, easing inflation, ongoing geopolitical tensions, trade-related uncertainty, and a slowing US economy.

Gold has delivered an exceptional performance in the past 12 months, registering gains of over nearly 80%, to comfortably outperform other asset classes such as equities and fixed income during the period.

Risks to the rally

However, on the downside, any improvement in global stability that lifts economic growth, strengthens currency demand, fuels inflation, and prompts the US Federal Reserve to pause or raise interest rates could create a reflationary backdrop. Such a shift towards risk-on sentiment may trigger a correction in gold prices.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)