Uncertainty after prolonged US govt shutdown, rate cut hopes fueling gold, silver's dream run: Analysts

New Delhi, Oct 9 (PTI) Prolonged US government shutdown, robust safe-haven demand and central bank purchases are fueling the dream run of precious metals gold and silver, with the white metal breaching the historic high of USD 50 an ounce on Thursday, analysts said.

Gold crossed the psychological USD 4,000 per ounce mark for the first time on October 8 while silver hit USD 51 per ounce shortly after breaching the historic USD 50 an ounce on Thursday.

Analysts said the rally in the precious metals was driven by a combination of macroeconomic factors, including a weaker US labour market, persistent inflation concerns, and renewed buying by central banks across the world.

In the domestic market, gold mirrored the global surge, touching record levels amid a steady rupee and a US dollar index of under 100.

Gold of 99.9 per cent and 99.5 per cent purity in the national capital traded at Rs 1,26,600 per grams and Rs 1,26,000 per 10 grams, respectively, (inclusive of taxes), on Thursday.

Silver prices bounced by Rs 6,000 to hit a fresh record of Rs 1,63,000 per kilogram, backed by strong global cues.

"The metal's strength has persisted amidst a steady dollar index hovering below 100 and rupee depreciation, supporting domestic prices. Investor focus remains on the deepening US government shutdown, weaker labour market data and rising expectations of Federal Reserve rate cuts, with markets pricing in more than a 70 per cent probability of reductions in both October and December," Manav Modi, an analyst at Motilal Oswal Financial Services Ltd, told PTI.

He said these factors have reinforced gold's appeal as a monetary hedge against policy and fiscal instability while global tensions and tariff wars have further stoked safe-haven buying.

Modi added that China's bid to assume the role of a global gold custodian, along with sustained central bank purchases, has bolstered sentiment for the metal, which continues to serve as both an investment asset and a reserve instrument.

"Amidst the global unrest, geopolitical and tariff tensions, many central banks that are major holders of US Treasuries are selling, and adding gold to their kitty as a safe haven asset. With rate cuts and tariff impacts on inflation, real rates are expected to decline, creating an inverse correlation with gold that has been largely absent since 2022," he said.

Central banks have remained net buyers of gold for more than a decade, increasing reserves amid global efforts toward de-dollarisation and as a hedge against market volatility and geopolitical uncertainty.

"Everyone is a buyer of gold in this rally, from retail investors to central bankers. Speculative positions have surged for both gold and silver, while AUM in ETFs and physical market demand indicate robust investor interest," Modi said.

He noted that as long as tariff disputes, US shutdown fears, rate cut expectations, and strong demand persist, a major correction in bullion prices remains unlikely. Till the time, tariff war, US shutdown fears, rate cut expectations, and overall demand are there, a big turnaround in price towards the lower side looks difficult.

Rajkumar Subramanian, Head - Product & Family Office, PL Wealth said, "Silver's surge past toward the psychologically critical USD 50 per ounce-threshold marks a defining moment for precious metals markets." Unlike the speculative excesses that characterised the 2011 peak, the white metal's Thursday rally is underpinned by fundamental structural imbalances – persistent supply deficits and accelerating industrial demand from solar, EV, and 5G sectors.

"Silver rose to hit record highs as heightened political and economic uncertainties and bets on US rate cuts drove safe-haven demand," Jigar Trivedi, Senior Research Analyst at Reliance Securities, said.

Investors continued to weigh the effects of the ongoing US government shutdown, which has clouded the economic outlook and delayed key data releases crucial for Fed policy decisions.

Globally, the industrial demand is expected to account for nearly 60 per cent of total silver production this year, driven by growth in green technologies such as solar energy, electric vehicles, and 5G infrastructure.

In addition, the automotive and aerospace industries have also emerged as significant consumers of silver, further tightening supply.

Silver has been running a structural deficit for the past four years, with the shortage projected to widen to 21 per cent in 2025. The continuing deficit has put upward pressure on prices as above-ground inventories have declined sharply.

Investor interest in silver has surged, with net inflows of 95 million ounces in the first half of 2025. The value of global silver holdings crossed USD 40 billion for the first time in June. Institutional investors, including the Saudi central bank, have reportedly increased their exposure to silver as a store of value.

Modi said if gold sustains above current highs, prices could advance toward USD 4,200-4,500 per ounce. For silver, he said the white metal has already achieved its domestic target of Rs 1,50,000 per kg and breached the USD 50 per ounce mark in the international markets.

"A sustained move above all-time highs could extend the rally toward USD 60 and Rs 1,80,000 per kg in domestic markets, assuming USD-INR at 89, on a medium- to long-term perspective," he added.

With strong investor interest, continued central bank buying, and persistent global uncertainties, both gold and silver are likely to remain on an upward trajectory in the near term, analysts said. PTI HG MR