Fear Is Driving Up Gold And Silver Prices
Fear of the new global order, the rapid macroeconomic and trade shifts, and the absolute uncertainty of what the US might do is pushing up gold prices
On Episode 787 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Kedia, Director at Kedia Commodities, Himanshu Sinha, Head of Tax Practice at Trilegal as well as Shankkar Aiyar, veteran economic journalist and author.
SHOW NOTES
(00:00) Stories of the Day
(00:50) Fear is driving up gold and silver prices even as the dollar stays weak.
(05:09) India is an oasis of macro stability says India’s economic survey
(10:39) Gold demand is set to fall because of subdued jewellery purchases.
(15:56) Will the Union Budget address the fallout of the Supreme Court’s decision to deny tax treaty benefits in the Tiger Global case?
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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.
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Good morning, it's Friday the 30th of January and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Our top stories and themes…
Fear is driving up gold and silver prices even as the dollar stays weak.
India is an oasis of macro stability, says India's economic survey.
Will the union budget address the fallout of the Supreme Court's decision to deny tax treaty benefits in the Tiger Global case?
And gold demand is set to fall now because of subdued jewellery purchases, thanks of course to zooming prices.
The Markets In Fear
Can you measure fear? Well, in some ways, yes.
So usually in retrospect, you could have said that you were scared in a certain situation or maybe it was not that bad. But if you could indeed measure fear, could you say where gold prices were headed? For any rapidly appreciating asset, experienced investors use prior benchmarks, rate of change, or gain, absolute figures, relative value to other assets, and so on. With gold and silver now, it's becoming tough to do any of that, as we will find out shortly.
And that's because fear is a key reason for its accumulation or the accumulation of gold, particularly and maybe silver. Fear of the new global order, the rapid macroeconomic and trade shifts, and the absolute uncertainty of what the United States might do tomorrow is pushing up gold prices like never before. And it's beating all past records.
It's flashed past the $5,500 per ounce on Thursday to touch $5,513 and had earlier hit $5,594, which is almost $5,600. Gold, which has hit new highs in nine straight sessions, has been up 28% for the month so far, according to Reuters. Now, remember, leading brokerages until even a few weeks ago were predicting $5,000 as a 2026 year-end target.
We've not only zoomed past that, as we just discussed, having passed $5,594 and are therefore now inching towards $6,000. We're moving so fast that only a few brokerages have scrambled to put out a $6,000 target, and that too for later in the year. And unless some sense prevails, we may hit that mark in a few weeks.
Meanwhile, silver has also extended its year-to-date advance of about 63%. Copper has jumped the most in 16 years, fuelled by a wave of speculative trading in China, according to a Bloomberg report. Bloomberg strategists also say that the speculative frenzy in gold is intensifying, even with indicators suggesting that it is exceptionally overbought.
Elsewhere, oil too is reacting on fear. It hit $70 a barrel for the first time since September, after US President Donald Trump warned Iran to make a nuclear deal or face military strikes. In the middle of all of this, Indian markets have been whipsawing in the last two days, moving back and forth through positive and negative territory, but ending positively on Wednesday and then on Thursday after a clearly tense day of trading.
The Sensex was up 221 points to close at 82,566. The Nifty 50 was up 76 points to 25,400. The markets will of course be open on being the day the Finance Minister will present the Union Budget 2026.
We will have a special live report at 5pm, which you can catch on YouTube and later on Spotify and Apple, amongst other streaming channels.
Economic Survey
Chief Economic Advisor V. Anant Nageswaran on Thursday said India stands out as a rare oasis of macro-stability at a time when the global economy is facing uncertainty, conflict and slowing growth. Speaking after the Finance Minister, Nirmala Sitharaman tabled the survey in the Lok Sabha on Thursday.
He said India's growth performance, stable inflation and strong external position underline its resilience in a fractured global environment. He said India is indeed an oasis of macro-stability in an otherwise turbulent world, and the numbers speak for themselves, adding that India's growth figures for the current year and the medium term stand out in comparison to any part of the world. He also said the economic survey lays out a clear roadmap for India's economic priorities over the next 25 years, with a strong focus on manufacturing and exports.
The survey said India's economy will grow between 6.8% to 7.2% in the fiscal year that starts in April. The forecast in the annual economic survey represents a slowdown from this fiscal year's projection of 7.4%. It also says the domestic economy remains on stable footing, but slower growth amongst trading partners and tariff-induced disruptions to trade could weigh on exports and investor sentiment. The survey is presented ahead of the Union budget on Sunday, from which expectations are as always high.
The question always is whether the budget will take the dramatic measures that many are expecting this time, or stay with the more incrementalist approach that previous budgets have taken.
The Domestic Market
The economic survey says India is a relatively better place than many economies due to its large domestic market, less financialized growth model, strong foreign exchange reserves, and a degree of strategic autonomy. It does caution that these trends will not provide complete insulation, and further suggests that policy credibility, predictability, and administrative discipline are becoming strategic assets in an uncertain global environment.
India will need to maximise growth while simultaneously strengthening buffers, liquidity, and shock option capacity, effectively running a long-distance race at sprint speed. Policy credibility and predictability is something many guests on the core report have pointed out to us, and I will also come to that in a moment, but before that, I did reach out to economic journalist and columnist Shankkar Aiyar, and I asked him what he saw in the economic survey that stood out for him.
INTERVIEW TRANSCRIPT
Shankkar Aiyar: The big thing that stood out for me in the economic survey is that government's recognition, in a sense, admission that they don't control all the impulses or all the factors of growth at the global context is far more complicated than they were earlier willing to admit. And this means that India, despite it being the fastest growing economy, despite inflation being low, despite having robust foreign exchange reserves, despite cutting of interest rates, it still does not get the dividend of firm or good macro fundamentals. And in that, they're trying to explain why the rupee, which hit 92 today, is struggling, why their balance of payment situation is struggling, and why because of the rupee, the liquidity issues have come up in the system.
So now some aspect of this will be addressed Sunday in the budget, probably in some tweaking of tax on deposits and fixed incomes to release some more money into the banking system. Beyond that, there is a whole list of reforms that survey is suggesting. We are yet to see what is the outcome or even an interim report on the promise made last year about regulatory reforms.
That's the one big thing. The second big thing, Govind, is that this survey recognises the rise in government borrowings and more so rise in the borrowings by state governments, thanks to some of the expansionary freebie or welfare or direct benefit transfer schemes that the states have. And that has led to a dropping or slowing down of investment across the economy because the borrowings of the state and centre are also crowding out private investment.
So there will be some measures required for that. Beyond that, I think the survey is a lot of Sunday sermon. My old thesis on economic surveys is that governments sin on six days of the week and then atone on the seventh day, which is the production of the economic survey.
But I think that there is some amount of alignment between the survey and the budget, which we have seen in the last two years. Whether that will be the case this year is difficult to perceive. But some of the issues highlighted by the survey may at least find space in the speech, the call for changing the investment paradigm, asking the private sector to invest more.
There may yet be another rethink on whether Chinese companies should be allowed to invest in India and the filters that were installed, how they can be changed. There could be a change in the long-term capital gains on portfolio investors to give some buoyancy to the stock market, which has been among the worst performing markets. And that might release some of the pressure on the rupee, which has been the worst performing currency.
So that's the only thing. I mean, given the uncertainty around the globe, the budget will do well to focus on domestic issues rather than sort of leapfrogging all over the place. So if they create a programme on urbanisation, if they create a programme for issuing of skilled certificates, create a programme on monetising land resources, all these things might help the economy much more than the sermon that is being printed.
It's an inordinately long economics survey. They are really being optimistic that somebody is going to sit down and read 700 pages.
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The survey also places obesity and unhealthy diets firmly in the economic risk category, not just in the health column, but flags the rapid rise of ultra-processed foods and growing obesity levels as a threat to productivity, health care spending, and long-term public finances.
Gold Demand
India's gold demand is likely to fall this year, following a 11% drop last year, thanks to a rise in prices which is dampening jewellery sales and offsetting an uptick in investment buying, according to the World Gold Council, which spoke to Reuters, according to whom demand for gold could be between 600 and 700 metric tonnes, compared to 710 tonnes last year, which is, or rather was, the lowest in five years.
According to the World Gold Council, jewellery buyers prefer stable prices of gold, and obviously the prices have been anything but that in recent times. Elsewhere, inflows into gold ETFs or exchange-traded funds were up 283% in 2025, to a record 42,000 crores, or roughly $4.6 billion. Domestic prices have risen about 76% last year, while the benchmark nifty 50 has only risen 10.5%. To understand what was happening in the commodity metal space, particularly gold, silver, and copper, and to understand the nature of the bull run that we are seeing, I reached out to Ajay Kedia, commodity expert, and I began by asking him whether this was a completely unusual phenomenon.
INTERVIEW TRANSCRIPT
Ajay Kedia: Whenever we talk about investment, there are 2-3 types of terminology like, is this rally is a bubble? Is this rally is a commodity super cycle? Is this rally is a mania?
It's not a bubble because it's driven by the fundamental we know that central banks are continuously buying gold, geopolitical tension, tariff from Donald Trump is consistently going on, ETF buying are there, shortages have been there. So that means this is not a bubble, this is a commodity cycle. First we have seen energy prices move, then now bullion.
But I think a rally of 120% in gold in last 1 year period and 340% in silver makes me more curious to see in my past. In 1980, we have seen this type of momentum and there was a crash. 2011, there was a rally and there was a crash.
So as of now we are looking to the volatility. See, January 2026 going, we have seen the momentum like almost 30% rally which was last seen in 1980 and similarly 70% rally in silver prices that has never seen in last 100 years. So I think with the volatility and money that is coming quickly, financial money is coming in similar sense what we have seen in 1980-2011 seems to be here.
So I think slightly be cautious as of now but in case of copper, still I think things have been very far but for gold and silver, one should be very cautious.
Govindraj Ethiraj: You also said that such historical monthly moves typically signal late stage acceleration. What does that mean?
Ajay Kedia: We have found in 1980-2011, there were certain patterns which are reflecting now. For example, margin hike in derivative product which is going on. Volatility would be more extreme because if it is a rally, if it is a circular, we can say commodity super cycle, the moment would be continue to be with the fundamental.
But the moment like 8-10% in silver in last 15-20 years, particularly in Jan-2026, same kind of moment has been seen in 1980-2011. I don't know whether the market will be crashing or getting corrected in next 2 days, 5 days or 15 days but this is the time we are on the verge.
Govindraj Ethiraj: Okay, so given all of this and the fact that fear and uncertainty continues in the global economic and trading order, how do you feel investors should be looking at these commodities, particularly gold and silver?
Ajay Kedia: The long-term perspective is still bullish because we have structural fundamentals. Still central bank is going to buy or we can say de-dollarization is important. But I think the rally what we have already seen, a corrective dip or a consolidation, time correction should be required.
Then one can again enter in gold and silver. But timing, I am suggesting that stay away as of now.
Govindraj Ethiraj: Right, and last question. So you touched upon copper as well where the factors that are driving demand are a little different from let's say gold and silver but that too has been hitting new highs. Is copper behaving this way for the same reasons as gold and silver or is it completely different?
Ajay Kedia: There is a threat for any commodity is substitution risk. We have seen gold prices rally, then silver catch up because silver we call as a shadow metal for gold and silver can be replaced by copper. So we know that there are many properties that are similar.
So I think the ratio of silver-copper is very adverse as of now. So that means copper should go up. Secondly, we have seen supply disturbance from Indonesia, Chile, which makes sense that prices should go up.
Third would be the demand side. We have seen EV, solar, whatever the demand that was pushing silver is similarly pushing copper also. Technically, up till now, we have never seen prices move beyond $10,200 mark on LME.
But right now, market has started moving beyond that. So we are expecting a good rally. And last would be the tariff because we have seen last year also inventories were piled up in COMEX because tariff concern was in there.
And now with US and Europe relations are getting bitter and bitter, I think tariff concerns still impacting copper also. So I think up till now, we have seen 60% rally in last one and a half year period of copper. Still, there is a scope of another 40-50% as consumption is there, supply concerns are there.
And now investors are also looking for opportunity in copper.
Govindraj Ethiraj: Ajay, thank you so much for joining me.
Ajay Kedia: Thank you.
Tax Treaties
One area that many, particularly foreign investors, will be watching carefully is to see what the government will do on the recent Supreme Court decision to deny treaty benefits to Tigard Global, a venture fund which sold shares in Flipkart to Walmart. Now, on 15 January, the Supreme Court had ruled that U.S. investment firm Tigard Global must pay tax in India on the sale of its stake in Flipkart, the e-commerce company, to Walmart in 2018. Now that judgement actually overturned a 2024 Delhi High Court decision, which allowed Tigard Global to claim tax relief under a fairly old India-Mauritius tax treaty.
Now, this ruling could cause foreign investors to relook or reshape their exits from Indian investments as they try and decipher what this tougher interpretation of tax treaties means. Because this does allow authorities to deny treaty benefits if the offshore investment structures are deemed to be so-called sham entities with little commercial substance, even if the documentation is valid. Now, there are some other layers to this issue, but the move, like we said, has spooked investors for sure.
So, could the union budget address this, or is it likely to address this matter in any way? And I put that question to Himanshu Sinha, partner in the Delhi office of Trilegal, who leads the firm's tax practise and has worked with the revenue service for almost 14 years before that.
INTERVIEW TRANSCRIPT
Himanshu Sinha: This straggling global decision of the Supreme Court has come as a big disruption. As you rightly said, it has spooked the investors. I mean, the investors who are already in the pipeline were thinking of exits at profits, which earlier they thought would not be taxable in India, but now under the Supreme Court decision, they can be potentially taxed.
And there's a high probability that they would be taxed in India, because the India-Mauritius treaties benefits would be denied to them under the Supreme Court decisions. Because the Supreme Court says that in order to get the benefit of the treaty, you need to show that in Mauritius, you had adequate commercial substance. Now, that is contrary to what the government had promised these foreign investors that for all the investments that were made prior to 1st of April 2017, which is the cutoff date on which the amended India-Mauritius treaty came into effect, would be so-called grandfathered, meaning thereby that government would not touch them and they would have the same favourable tax treatment, which they had earlier before the amendment of the treaty. But the court now has negated that approach and said, no, tax authorities have the power to tax those transactions, disregard the grandfathering promise given by the government. Now, this promise was not a mere administrative assurance.
This was a statutory assurance because rules had been changed. And those rules have now been interpreted by the court to dilute the assurance that was given by the government. So now, of course, the finance minister would be deeply concerned about it because in international quarters, this decision is being discussed widely as having wider ramifications on the tax certainty scenario in India, as it had happened at the time of Vodafone decision several years ago, when the government has had brought about retrospective amendment to the detriment of taxpayers.
Today, ironically, we have a Supreme Court, which is creating this so-called uncertainty, whereas in the past, it was the government which had created uncertainty. So now, in this budget, the finance minister will be faced with a tough situation where she has to balance the legal requirements of what the Supreme Court has held. As the apex court of the country, the government cannot really be taking a position which is diametrically opposite.
At the same time, they need to switch the concerns of the foreign investors. So, it is being widely speculated that the finance minister, by way of some kind of assurance, some kind of statement, will want to allay the fears of the foreign investors that old matters will not be reopened where benefits have already been claimed. And probably, new matters will also be looked at a very careful lens and there may be some new set of guidelines to guide the tax authorities so that they can apply the Supreme Court ruling only in certain egregious cases where the tax treaty benefits were claimed in a manner where there was absolutely no commercial rationale at all.
So, there might be some guidelines about it. Now, the third possibility, which some people are talking about, but is improbable, that there's a retrospective amendment in favour of the taxpayers in the rules itself in order to overcome the Supreme Court interpretation. That is, again, in my view, far-fetched and unlikely.
But if it happens, of course, it will be a big thing and a welcome relief for the foreign investors.
Govindraj Ethiraj: All this means is that this is a matter that the finance ministry seized off and hopefully or is likely to address it in the speech that's going to be presented on Sunday.
Himanshu Sinha: In some form or the other. That's right.
Govindraj Ethiraj: Got it. Okay. Let me pick up another point which you've been tracking or following is the possibility of some kind of tax ops for either research and development or in some of the newer investment areas like data centres.
Himanshu Sinha: Yes, that's right. So, some of these sectors have been very buoyant where a lot of foreign capital has been coming in, investments are being made, employment is being generated for skilled people in India. There's been a lot of buzz around this expectation that the government may bring in some kind of tax incentives, whether by way of tax credits or additional depreciation benefits or some kind of tax holiday which is available to certain eligible startups.
So, people are now speculating that the government may expand the ambit of the tax holiday which is currently available only to eligible startups to all kinds of companies who are coming in these emergent areas where employment is being generated and such kind of benefits. Now, the point is, the larger policy question is that this may amount to a reversal of earlier policy pronouncement made by the government that they are largely in favour of not having tax holidays. And on this rationale, the government had brought down the corporate tax rate a few years ago to a very moderate rate of 22% which is lower than the contemporary OECD rates that you see elsewhere in the world.
So, our rate right now is very competitive and the corporate tax rate is quite benign. So, the government to take a call, it will amount to a major policy initiative. And of course, it's for the government to decide whether they would want to do it in order to further give a boost to investments and employment generation in these critical areas.
Govindraj Ethiraj: Right, Himanshu. Thank you so much for joining me.
Himanshu Sinha: Thank you very much.
Age Limits
And in a significant development, India could join other nations in setting age-based limits for social media access. India's chief economic advisor called on the government to set age-based limits on access to social media apps to counter digital addiction, cautioning against children's use of platforms in the largest user market for Meta and YouTube.
If India does this, then India will join other countries like Australia and many more who are lining up to issue similar guidelines. But the fact that this came out in an economic survey is, of course, quite interesting and noteworthy.
