Gold, silver prices may fall another 5–6% amid profit booking, says MOFSL's Navneet Damani

Gold and silver prices could witness further declines in the near term as investors continue to book profits after a sharp rally, according to Navneet Damani, Senior VP – Commodity Research at Motilal Oswal Financial Services Ltd (MOFSL).

"Both gold and silver have delivered exceptional returns this year -- about 60 per cent for gold and nearly 80 per cent for silver over the last eight to 10 months. The recent correction is mainly due to profit-taking after such a strong run," Damani told Business Today on Friday.

He underscored that there has been no major change in the macroeconomic fundamentals. "Supply-side issues for both metals remain, demand continues to be strong and central banks are still active buyers. What we are seeing now is simply the market cooling off after excessive exuberance," he said.

Damani noted that the recent surge from $4,000 to $4,400 in gold and from $45 to $55 in silver reflected froth in the market. "That froth is now being absorbed. Prices are returning to equilibrium," he added.

The expert expects both metals to decline by another 5–6 per cent before stabilising. "Gold could fall to around $3,838.50, while silver may correct to the $44.5–$45 range. Given the recent appreciation in the rupee, domestic prices could drop even more," he said.

On the domestic front, the expert said silver, currently trading around Rs 1,45,000 per kg, could find strong support between Rs 1,36,000 and Rs 1,38,000, making it a good re-entry zone. For gold, he expects buying interest to emerge between Rs 1,12,000 and Rs 1,15,000 per 10 grams -- about Rs 6,000–7,000 lower than current levels.

He ruled out a sharp rebound in the short term. "This is not likely to be a V-shaped recovery. Prices may consolidate with time-wise corrections and limited returns over the next couple of quarters before the next leg of upward movement begins," Damani said.

Despite the short-term weakness, he maintained a relatively positive long-term view on silver compared to gold.