Buy or avoid gold and silver during China's Lunar New Year? Impact explained

Gold and silver futures traded up to 4 per cent higher in Wednesday's trade on MCX, as the Chinese Lunar New Year holidays drained liquidity from key Asian commodity markets and heightened the risk of sharp, short-term moves in precious metals. With major commodity exchanges in China and Hong Kong closed, analysts said thinner participation may amplify volatility.

On Wednesday, MCX silver futures for March 5 delivery were trading 3.51 per cent higher at Rs 2,36,824 per cent. MCX gold futures stood at Rs 1,52,742, up 0.88 per cent.

What is Lunar year? The lunar new year is a moving holiday that lasts a full work week and falls anywhere between January 21 and February 20 each year. This year, the lunar new year holidays were entirely in February starting February 17. Last year, it spanned both January and February, starting January 28. It is common for consumers to go on a shopping spree before the holiday officially starts, and for factories to shut down days earlier to allow workers to return to their hometowns. 

Many Asian countries therefore have fewer working days this February than in February 2025, and vice versa for January (i.e., more working days in January 2026). 

Impact on gold, silver prices   Aamir Makda Commodity & Currency Analyst, Choice Broking noted that as China, the world’s largest physical buyers of precious metals go offline, trading volumes thin out, often resulting in exaggerated price volatility and wider bid-ask spreads. 

Historically, this period triggers a price correction, he said. Once the pre-holiday buying pressure from China ceases, traders who entered positions early often engage in profit-taking, leading to a downward shift in momentum. 

"Silver is particularly vulnerable during this timeframe compared to gold; because Chinese industrial production hits a standstill during the festivities, the dramatic drop in manufacturing demand makes silver prices much more susceptible to a sharp decline. With this perspective, it is advised to traders to avoid taking trades in bullion," he said.

Hareesh V, Head of Commodity Research at Geojit Investments noted that during China’s Lunar New Year holidays, gold and silver markets often see lower participation, as major Asian exchanges, including Shanghai and Hong Kong remain closed, creating a temporary liquidity vacuum. 

"This reduced activity can amplify volatility, with prices sometimes dropping sharply due to weaker physical demand and fewer market makers. Historically, these pullbacks tend to be seasonal rather than structural, with prices stabilizing once Asian markets reopen and normal trading resumes," he said.

What's next? Ponmudi R, CEO of Enrich Money, said MCX Gold futures are trading near the Rs 1,50,000-1,60,000 zone after consolidating from all-time highs around Rs 1,80,000-Rs 1,81,000. While short-term price action remains range-bound, the broader uptrend structure continues to hold, with prices sustaining above critical long-term supports, he said.

"Strong buying interest is evident in the Rs 1,45,000-1,50,000 support region. A sustained hold above this base, followed by a breakout above Rs 1,60,800, could revive upside momentum toward Rs 1,65,000–1,75,000, keeping the medium-term outlook constructive despite near-term volatility," he said.

In the case of silver, MCX futures are trading near the Rs 2,30,000-2,70,000 zone after correcting sharply from record highs around Rs 4,20,000. 

While the long-term bullish framework remains intact, the steep decline has placed prices below major moving averages, signaling short-term corrective pressure, Ponmudi said. 

"Strong buying interest is visible in the Rs 2,25,000-2,35,000 support band, aligned with previous swing lows and broader structural support. A sustained hold above this zone, followed by a decisive recovery, could revive upward momentum toward Rs 3,00,000–3,25,000. Dips toward support may offer accumulation opportunities for positional traders," he said. 

Near-term sentiment remains cautious amid a firmer dollar and uncertainty around the policy outlook of the US Federal Reserve. However, safe-haven interest and ongoing central-bank buying continue to provide support on dips, said Gaurav Garg, Research Analyst at Lemonn Markets Desk.

Ole Hansen, who is  Head of Commodity Strategy at Saxo Bank, since 2010, in a note on Tuesday said the Lunar New Year pause exposed how dependent recent price strength was on Asian participation. In the near term, metals may remain sensitive to currency moves and liquidity conditions, he said adding that a crowded short-dollar trade adds an additional risk factor that could generate volatility.

"Over the medium term, the structural bull case for gold and copper remains intact, supported by macroeconomic, geopolitical and energy-transition dynamics. Silver’s outlook remains constructive but tactically less convincing following recent volatility," he said.