Yields, dollar hold key to gold, silver trajectory in H2FY27: Apurva Seth

Disclaimer: This article is written by Apurva Sheth, head of market perspectives & research, SAMCO Securities. Views expressed are his own. Readers' discretion is advised. Gold and silver entered a challenging phase in the first half of FY27. After an extraordinary rally earlier in 2026, precious metals faced renewed selling pressure as global bond yields climbed, inflation concerns resurfaced, and expectations of tighter monetary policy strengthened. Gold, which had touched record highs above $5,600 an ounce earlier this year, subsequently corrected sharply and is now trading around the $4,100-$4,200 zone. Silver has also witnessed considerable volatility, recently trading around $61-$65 an ounce.

The immediate headwind for bullion remains the rise in sovereign yields. The US 10-year Treasury yield recently reached 5.18 per cent, its highest level since 2007. Higher yields increase the opportunity cost of holding non-yielding assets such as gold and silver, while a firmer dollar can add another layer of pressure.

However, the current correction needs to be viewed in the context of the exceptionally strong run-up preceding it. Gold's decline from its January peak has been substantial, potentially creating a healthier valuation base for the next phase of the cycle. Importantly, the structural factors supporting bullion have not disappeared. Central-bank demand, concerns over fiscal sustainability and geopolitical uncertainty remain relevant sources of underlying demand. A Reuters survey in July put the average 2027 gold forecast at $4,610 an ounce, despite analysts having lowered their estimates following the correction.

This creates an interesting setup for the next six months.

Gold and silver have corrected sharply since April, falling 11 per cent and 19 per cent, respectively, in USD terms. The primary driver has been a shift in the global macro backdrop: rising US Treasury yields and a firmer dollar have increased the opportunity cost of holding non-yielding precious metals. At the same time, the sharp rise in crude oil has revived inflation concerns, strengthening expectations of a more restrictive Federal Reserve policy and further rate hikes. This has triggered profit-taking after the strong rally earlier in the year, with speculative positioning also moderating. Silver has underperformed gold given its greater sensitivity to industrial-demand expectations and its higher volatility.

If inflation stays elevated and energy prices remain firm, bond yields could remain high and precious metals may continue to consolidate. The recent energy-price shock has already prompted expectations of additional monetary tightening among major central banks. S&P Global has highlighted rising sovereign yields and the possibility of further tightening as important risks for the global economy.

H2FY27 outlook

The second half of the period, however, could look different if inflation pressures moderate and markets begin anticipating an eventual easing in monetary conditions. In such an environment, falling real yields and a softer dollar could provide a powerful catalyst for gold. From the current $4,100-$4,200 region, a move towards $4,600 over the next couple of quarters would represent a meaningful but technically plausible recovery rather than a return to the year's earlier extremes.

Silver could potentially outperform gold during such a rebound. Unlike gold, silver has a significant industrial component to its demand, linking its prospects not only to monetary conditions but also to manufacturing, electronics, solar and broader industrial activity. Its higher volatility means that a sustained gold recovery could produce an amplified move in silver.

The critical variable, therefore, will be the direction of real yields rather than nominal yields alone. If nominal yields remain elevated but inflation expectations rise faster, real yields could decline, improving the relative attractiveness of bullion. Conversely, persistently high real yields would keep pressure on precious metals.

For the six months through March 2027, the most probable market character may therefore be one of high volatility followed by a potential recovery, rather than a straight-line rally. Gold's ability to reclaim $4,300-$4,400 would be an important technical signal, with $4,600 emerging as a potential medium-term objective. Silver could follow gold higher, but its larger industrial exposure and higher beta could make its journey considerably more volatile.

For investors, the next six months may consequently be less about timing the bottom and more about watching the three variables that matter most: US real yields, the dollar and central-bank policy expectations. The direction of these indicators is likely to determine whether the current bullion correction develops into a prolonged consolidation—or the launch pad for the next leg higher.