Gold & Silver Crash: Gold ETFs slid up to 16% after gold prices fell Rs 9,000 per 10 gm and silver crashed Rs 17,000 per kg, rattling precious metal investors.
Gold ETFs slide sharply as gold and silver prices tumble, triggering heavy losses for precious metal investors (Photo: File)
Gold & Silver Crash: The gold and silver markets were jolted by a sudden sell-off, which created shockwaves in the investment community. The gold ETFs fell sharply by as much as 16% as gold prices crashed by almost Rs 9,000 per 10 grams in a single trading session while the fall in silver prices was even more drastic, with prices crashing by almost Rs 17,000 per kilogram. This sudden correction is one of the most dramatic pullbacks in recent weeks, which has disrupted the momentum of a record-breaking rally.
The effect was not delayed in the ETF segment. Gold ETFs dropped as much as 16% in early trading, keeping in line with the steep fall in spot and futures markets. Baroda BNP Paribas Gold ETF, Motilal Oswal Gold ETF and Edelweiss Gold ETF were some of the worst-hit funds, losing more than 15% in a single day while silver ETFs were no different either. Bandhan, Motilal Oswal and Zerodha Silver ETFs dropped between 14 and 16%, indicating panic selling by short-term investors.
ICICI Prudential Gold ETF, Bandhan Gold ETF and Groww Gold ETF slipped nearly 14% each in early trade while on the silver side, Bandhan Silver ETF tumbled about 16%, while Motilal Oswal and Zerodha Silver ETFs dropped close to 15%. Groww Silver ETF and several others also declined by up to 14%, reflecting broad-based selling across precious metal funds.
The figures point out the extent of the correction. The gold futures began the day with a fall of close to 6%, eliminating more than Rs 9,000 for every 10 grams in a single day. The significant part, however, is the net movement. Gold has fallen by close to Rs 50,000 for every 10 grams in merely three trading days, which is a decline of close to 26% from its recent high. Silver, on the other hand, has fallen by more than Rs 17,000 per kilogram in a single day and by close to Rs 1.45 lakh per kilogram or 35%, over the same period.
The principal catalyst appears to be aggressive profit-taking following the run-up with both metals had risen to prices that were not sustainable, driven by aggressive speculative positions. As the price peaked, traders rushed to lock in profits, accelerating the decline with a stronger dollar and rising bond yields added to the woes, making non-yielding instruments such as gold and silver less attractive in the short term.
Global indicators were critical with the latest concerns that US policy could remain restrictive for a longer period shook the commodity markets. The notion that the new Fed leadership could have a tougher stance on inflation pushed yields up, thereby discouraging investors from precious metals and at the same time, the general risk appetite in the world slightly increased.
However, despite the dramatic fall, it is important not to read too much into it with the support of central bank purchases, geopolitical uncertainty and supply constraints means that it is not a fundamental failure. In the short term, volatility is expected with prices holding steady at lower levels until a clearer trend is established. For the more patient investor, the fall may be painful but could also help prices realign with more accurate levels.
