What’s the story
Gold and silver exchange-traded funds (ETFs) witnessed a major drop today. The decline came as investors booked profits after a recent rally in precious metals.
The fall was also attributed to weakness in global bullion prices and a stronger US dollar.
Silver-linked funds were the worst hit, with ICICI Prudential Silver ETF falling by nearly 7.3%.
Silver-linked funds worst hit
The market correction was most severe for silver ETFs.
Nippon India Silver ETF and SBI Silver ETF both fell by over 7% in early trades. Tata Silver ETF also witnessed a decline of over 7%.
Gold ETFs too were affected but the losses weren’t as steep as those seen in silver-linked funds.
ICICI Prudential Gold ETF fell by nearly 4%, while Nippon India ETF Gold BeES, SBI Gold ETF, and Tata Gold ETF all saw drops of around 3-4%.
Domestic fall mirrors Tuesday’s global correction
The domestic fall in gold and silver ETFs mirrors Tuesday’s global correction, when gold fell by over 4% and silver by over 8%.
This was due to a stronger US dollar and reduced expectations of near-term rate cuts.
The move coincided with the closure of Indian exchanges, resulting in a catch-up adjustment in local ETF prices.
Geopolitical tensions boost gold demand, says expert
Satish Dondapati, a Fund Manager at Kotak Mahindra Asset Management Company, said gold has gained 2-3% in recent sessions amid rising Iran-Israel-US tensions that boosted safe-haven buying.
He noted that prices could remain firm in the short term if geopolitical risks persist but added a cooling in tensions may trigger profit booking or a temporary correction.
A stronger US dollar might also cap further upside as gold typically moves inversely to the currency.