Decoding The Gold And Silver Price Decline: MCX Record Highs To June Lows Explained

The stellar run by gold and silver in the previous months came to an abrupt halt in June, as gold futures with August 5 expiry fell nearly 27 per cent from their all-time highs of January 2026.

Notably, gold futures had hit a lifetime high at the Rs 2,04,375 per 10 gram level. However at the day’s low on June 12, 2026, gold futures traded around the Rs 1,49,498 per 10 gram mark. On the other hand, silver futures with July 3, 2026 expiry fell nearly 48 per cent from the lifetime high hit on the multi commodity exchange (MCX) earlier this year, as they slipped to an intra-day low of Rs 2.40 lakh per kg.

This decline has left investors wondering about the continuity of the commodity bull run. This is also expected to change investor sentiment from optimism to cautious anxiety, leading to an examination of the global forces driving the sell-off.

Unpacking the Catalysts Behind the Crash

The near-five month decline in the prices of precious metals is likely to have occurred because of the coming together of multiple factors  such as pressure from a hardening US Federal Reserve stance and strengthening of the dollar against the rupee. Aamir Makda, commodity and currency analyst at Choice Broking, told Outlook Money that macroeconomic pressures have heavily weighed on the bullion market. 

“As gold and silver are non-yielding assets, rising yields on government bonds reduce their appeal. A strengthening dollar has made precious metals pricier for foreign buyers, dampening demand in countries like India and China,” said Makda.

He added that the Federal Reserve's monetary policy stance has raised the likelihood of sustained high interest rates in the US, which reduces the allure of non-yielding assets like gold and silver.

“The surge in oil prices, tied to geopolitical tensions, has heightened fears of inflation, prompting central banks to maintain high rates, further pressuring gold prices. Moreover, speculative selling and profit booking have exacerbated the decline, particularly once key technical support levels were breached,” Makda said.

Kaynat Chainwala, assistant vice president, commodity research at Kotak Securities said that one of the core drivers of the current leg of declines in gold and silver prices is the sharp repricing of the US rate outlook. Chainwala said that robust labour market data pushed the probability of a December Fed rate hike to 60-70 per cent on the CME FedWatch Tool, which in turn led to the 10-year Treasury yield towards 4.60 per cent and made precious metal relatively less lucrative.

“The key shift this cycle is that the conflict, rather than lifting gold and silver through their conventional monetary appeal, has instead worked against them by feeding inflation, hardening the Fed’s stance, and strengthening the dollar,” Chainwala said.

Why Silver Suffered a More Severe Blow

While both silver and gold have seen declines, the drop has been more severe in silver. Makda said that silver’s utility and market dynamics make it inherently more vulnerable during economic uncertainty as it does not benefit from institutional buying during downturns.

“Silver, which is viewed both as a precious metal and an industrial commodity, relies heavily on industrial demand, as approximately 55-60 per cent of the demand comes from sectors like solar energy, electronics, and electric vehicles. Additionally, the smaller market size of silver leads to heightened volatility and leverage, resulting in rapid sell-offs,” Makda added.

Portfolio Safeguards Amid Rising Volatility

Even with a US-Iran peace deal on the horizon and a temporary calming in investor sentiment, volatility cannot be completely ruled out till a deal is finalised, thus investors are left wondering how to protect their portfolios using safe haven assets, as they too have declined amid the West Asia conflict.

Makda urged investors to consider pivoting to safer yield-generating instruments and to move away from highly volatile segments. He added that in the current scenario managing asset exposure is necessary for surviving supply chain shocks.

“Focus on short-duration yield assets, such as short-term Treasury Bills and high-yield savings, which offer low-risk returns and protect against market volatility,” Makda said.

He also suggested that investors can consider maintaining liquidity in stable currencies like the Swiss franc and the dollar to hedge against economic downturns. He also added that investors can consider diversifying into defence and energy sectors, as they tend to benefit when geopolitical tensions rage.

“Limit exposure to precious metal to 10-15 per cent, and reduce allocation to volatile silver to minimise risk. Lastly, diversify investments into defence and energy sectors, as these areas benefit from geopolitical tensions and can provide revenue stability amidst broader market disruptions,” Makda said.

Chainwala urged investors to view precious metals through a broader macroeconomic lens as opposed to a standalone hedge. She noted that the current environment serves as an important reminder that conflict-driven inflation can temporarily offset the safe-haven appeal of bullion.

“This argues for viewing precious metals as one component within a diversified allocation rather than a standalone hedge against any single type of risk,” Chainwala said.

She also cautioned against making large, single-payment investments.

“Staggered entry tends to reduce the risk of poorly timed lump sum positioning. Keeping a close watch on the interplay between inflation data, Fed signaling, and the West Asia conflict is essential, since these three threads are currently moving together rather than offsetting each other,” Chainwala said.

Despite the near-term pain, Chainwala urged investors to consider that the long-term fundamentals remain intact for safe haven assets.

“Sustained buying by central banks, including China's 19th straight month of reserve accumulation in May continues to provide a durable demand floor for gold, while for silver, multi-year supply deficits and strong industrial demand from solar and EVs remain long-term drivers regardless of near-term volatility,” Chainwala said.