Ajay Bagga: Gold, Silver Dip On Profit-Taking, But Long-Term Bullish Outlook Remains Strong

Precious metal markets saw a sharp correction on Friday, October 17, 2025, with both Gold and Silver prices falling significantly from the all-time record highs they had recently achieved. 

This decline was primarily a profit-taking wave triggered by specific external market factors that temporarily eased geopolitical and economic anxieties.

Key Drivers for the Friday Price Decline
1. Profit-Taking and Correction from Record Highs
This was the most immediate technical driver. Both Gold and Silver had experienced a historic, parabolic rally over the preceding weeks, pushing them to unprecedented levels ($4,378.69/oz for Gold and $54.47/oz for Silver). After such a sustained, sharp ascent, a healthy technical correction and profit-taking by speculators and short-term traders were virtually inevitable. The market simply took a breath and consolidated its massive gains.

2. Easing US-China Trade Jitters
A significant factor that took "heat out of the precious trade" was a more conciliatory tone from US President Donald Trump regarding the threatened high tariffs on China.
•    President Trump commented that his threatened high tariffs on China would "not be sustainable," suggesting a possible de-escalation.
•    He also confirmed a meeting with Chinese President Xi Jinping.
This reduced the immediate fear of a severe geopolitical and economic conflict that had fueled safe-haven demand for Gold and Silver, prompting investors to unwind some of their crisis hedges.

3. Stronger US Dollar Index (DXY)
The US Dollar Index (DXY) saw a rise on Friday.
•    A stronger US Dollar makes dollar-denominated commodities, like Gold and Silver, more expensive for holders of other currencies, which typically puts downward pressure on their prices.
•    This dollar strength often acts as an inverse headwind for precious metals.

Outlook for Gold and Silver
Despite the sharp one-day correction, the overall structural and long-term outlook for both Gold and Silver remains overwhelmingly bullish. The underlying drivers for the metals' multi-year rally are still firmly in place.

Gold Outlook 
The core fundamental support for Gold remains robust, with several major banks forecasting new, higher price targets.

Factor Outlook
Geopolitical & Economic Uncertainty High: 
Ongoing US fiscal concerns, high national debt, and renewed trade tensions ensure Gold maintains its crucial safe-haven appeal.

Monetary Policy Highly Supportive: 
Market expectations for multiple Federal Reserve interest rate cuts (starting as early as October/December) are a massive tailwind. Lower rates reduce the opportunity cost of holding non-yielding Gold and put pressure on the US Dollar.

Central Bank Demand Structural/Strong: 
Central banks, particularly in emerging markets, continue to diversify their reserves away from the US Dollar and into Gold. This is viewed as a long-term structural shift that will sustain demand.

Forecasts (Long-Term)   
Analysts are raising targets, with Bank of America forecasting an average of $4,400/oz in 2026, and a potential test of $5,000/oz in the outer years.

Short-Term View 
Expect continued volatility as traders book profits after the massive surge, but buying on dips is the consensus strategy as long as key support levels hold.

Silver Outlook 
Silver's outlook is even more explosive than Gold's due to its dual nature as both a precious metal and a critical industrial metal.

Factor Outlook
Industrial Demand Extremely Strong: Silver is indispensable for high-growth, secular trends, including solar energy (photovoltaic cells), Electric Vehicles (EVs), and AI hardware/semiconductors. This industrial use creates a non-speculative floor for the price.

Supply Dynamics Persistent Deficit: The global silver market is running a structural supply deficit for the fifth consecutive year. Inventory levels at major exchanges (like the London Metal Exchange) have been depleted significantly due to this deficit and logistical issues.

Investment Demand High Volatility: The market has recently seen severe tightness and volatility due to large speculative interest and a physical supply crunch, which can lead to sharp spikes and corrections.

Forecasts (Long-Term) -  Silver is widely expected to outperform Gold due to its supply-demand fundamentals. Bank of America forecasts a potential target of $65/oz, and other analysts see a path to $75/oz or more.

Short-Term View High Volatility Alert - Given the recent speculative frenzy and physical market dislocation, traders must be cautious. However, the long-term trend remains firmly upward, supported by industrial growth.

In conclusion, Friday’s price falls were a necessary tactical retreat driven by short-term sentiment shifts and natural profit-taking after an historic rally. The strategic case for Gold and Silver remains highly compelling, supported by structural factors including global de-dollarization, persistent supply deficits (Silver), central bank accumulation, and an environment of low real interest rates and high geopolitical risk. Investors should view the correction as an opportunity to establish or add to long-term positions.

Read More - Silver Plunges 6% After Record Highs - What Triggered the Sell-Off?