Gold and silver prices: After posting their strongest gains in decades in 2025, the blistering rally in gold and silver has cooled in the current year. The bullion kicked off 2026 on a robust note, but a one-way rise in the precious metals halted at the end of January when prices recorded their worst decline in recent history.
Since then, gold and silver have continued to consolidate. Spot gold prices trade over 10% below the all-time high of $5,595. Gold’s cheaper cousin, silver, indeed has had a poorer fate as it remains 35% below its peak of $121.
These numbers seem attractive for investors who could not jump in last year’s rally and remain in FOMO. But will buying now be a prudent move?
Central bank buying momentum is slowing
Investors must understand that a large part of the rally in gold followed massive central bank buying as they looked to diversify away from the dollar, as debt in the US economy swells to unsustainable levels. Today, we are in the 5th year of central bank purchases. Recently, gold took over the US Treasury as a reserve asset due to its MTM gains and central bank purchases.
Analysts at DSP Mutual Fund recently noted that gold prices have surged well beyond monetary fundamentals, raising questions about how much of this non-yielding asset central banks should hold.
Central bank purchases, which have long driven the gold bull market, began to slow in 2025. Gold purchases by central banks fell 21%, marking the first year since 2022 with less than 1,000 tons bought.
With central banks stepping back, leadership of the gold rally has shifted to ETFs. Unlike central banks, ETFs are momentum-driven — most demand comes when recent returns look attractive. In 2025, total investment demand for gold in the form of bars, coins, medals, and ETFs surged 84%.
However, such sharp increases in investment demand are rarely sustained, said DSP MF. “Price volatility causes most of these investment purchases to turn into net sales. This weakens the case for continued momentum in the gold price.”
It remains to be seen whether investors on their own can drive prices higher or not.
Moreover, real rates remain high, and inflation remains benign, which makes the backdrop for gold and silver prices unfavourable. The fund house also asked investors to focus on the gold-silver ratio.
For silver, as we have repeatedly noted, an overweight stance makes sense at a Gold-Silver Ratio of between 80 and 100, and not at 45 to 60, said DSP MF. It sees limited upside in silver based on gold.
Should you avoid or buy gold and silver?
In case you had no prior allocation to gold and silver in 2024, this would not be the right time to experiment, according to experts.
“New investors should not enter with large weights or allocate fresh funds at this time. At best, to avoid FOMO, start a token SIP if you can’t control your urge to participate. Make sure the position doesn’t hurt your portfolio if precious metal prices see a drawdown,” the mutual fund house said in a note.
Its views were echoed by JM Financial’s Pranav Mer, who believes that gold can be added in a staggered manner at corrective dips. On MCX futures, we see strong Support at 134,000 per 10gm, till holds, the trend remains positive, he said. However, he said that at this point outlook for silver is difficult to predict.
“Let the current volatility settle down and wait for fresh fundamental triggers,” he opined. He sees strong support in gold at $3900-$4000 and resistance at $5600. Silver may see support around $48-$52 per ounce.
The bottom line is that investors should wait for better price levels to add exposure to precious metals, or let time work its way through to bring down median returns, said DSP MF.
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.
