Gold and silver ETFs slipped up to 10% for the second straight session as global cues turned weak. Should investors book losses or hold for long term? Here’s what experts suggest.
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Gold and silver exchange-traded funds (ETFs) witnessed a sharp sell-off for the second consecutive day, with prices falling up to 10%. The sudden decline has rattled investors who had recently turned bullish on precious metals due to global uncertainty and inflation concerns.
The fall in gold and silver ETFs comes as global markets stabilised, the US dollar strengthened, and bond yields moved higher. These factors usually put pressure on precious metals, as gold and silver do not offer interest income.
Why Are Gold and Silver ETFs Falling?
There are several reasons behind the sharp correction:
- Profit booking: After a strong rally in recent weeks, investors booked profits.
- Strong US dollar: A firm dollar makes gold and silver expensive for global buyers.
- Reduced safe-haven demand: Equity markets showing stability reduced fear-driven buying.
- ETF outflows: Some large funds trimmed exposure to metals.
Should Investors Exit Now?
Market experts believe that panic selling is not the right approach. Gold and silver are known for high volatility in the short term, but they continue to play an important role in long-term portfolio diversification.
- Short-term traders may see more pressure if global yields rise further.
- Long-term investors should consider holding or adding gradually on dips.
- Systematic investors can continue SIPs in gold ETFs without interruption.
Historically, sharp corrections in precious metals have often been followed by periods of consolidation or recovery.
Outlook for Gold and Silver
While near-term sentiment looks weak, the medium to long-term outlook remains stable, supported by:
- Global geopolitical risks
- Central bank gold purchases
- Inflation hedging demand
Experts advise investors to keep allocation limited and aligned with their risk profile.
On Friday, the Kotak Silver ETF led the losses, sliding 10%, while the HDFC Silver ETF, SBI Silver ETF and Edelweiss Silver ETF fell about 9% each. Bandhan Silver ETF recorded the smallest decline, down around 6%.
Among gold ETFs, the Angel One Gold ETF slipped 8%, followed by the Zerodha Gold ETF, which declined 5%.
Hareesh V, Head of Commodity Research at Geojit Investments, told ETMutualFunds that gold and silver remain highly volatile after last week’s steep plunge, which was triggered by hawkish Federal Reserve expectations following Kevin Warsh’s nomination, a stronger US dollar, and sharp margin hikes by the CME that forced leveraged positions to unwind. Profit-taking after record highs further amplified price swings, keeping market sentiment fragile.
Advising investors on the way forward, Hareesh said bullion investors should remain patient and avoid reacting to short-term volatility driven by margin hikes, profit-taking and policy uncertainty.
“Gradual, staggered accumulation can help manage timing risks as long-term fundamentals such as geopolitical tensions, central bank demand and currency pressures remain supportive, while closely tracking the US dollar and upcoming Federal Reserve signals is crucial to navigating the current phase of heightened volatility,” he said.
In Friday’s session, MCX silver futures for March 5 delivery plunged 6%, falling Rs 14,628 to Rs 2,29,187 per kg. Gold futures for April 2 delivery also came under pressure, slipping Rs 2,675, or 2%, to Rs 1,49,396 per 10 grams.
Silver has remained extremely volatile in global markets. Prices rebounded as much as 3% after plunging 10% to below the $65 level, a more than six-week low. Despite the rebound, the white metal was still down nearly 16% for the week. In the previous week, silver had shed 18%, marking its steepest weekly decline since 2011.
The sharp selloff spilled over into domestic ETFs as well. On Thursday, commodity-based ETFs fell as much as 21%, led by silver ETFs, which plunged up to 21%, while gold-based ETFs declined up to 7%.
The steep fall followed a series of margin hikes in precious metal futures. Margins on silver futures were raised by 4.5% and on gold futures by 1%, effective February 5. This was followed by an additional hike of 2.5% on silver futures and 2% on gold futures, which came into effect on Friday.
As a result, the total additional margin now stands at 7% for silver futures and 3% for gold futures from February 6 onward.
That silver has corrected largely because prices had risen too quickly over a short period. During such phases, short-term selling pressure and lower liquidity can also make ETF prices look weaker. He added that the recent fall reflects price adjustment and profit-booking rather than any sudden deterioration in silver’s fundamentals.
“There’s no need for panic. Silver is a volatile asset and sharp ups and downs are part of the journey. One correction does not change the long-term relevance of silver, but it does remind investors why position sizing matters,”.
He advised investors to avoid chasing prices or reacting to day-to-day movements. “If someone wants exposure, staggered buying is a far more sensible approach than lump-sum investing, especially in a volatile phase like this. For long-term investors, this phase calls for patience and discipline rather than action.”
FAQs
1. Why did gold and silver ETFs fall sharply?
The fall is mainly due to profit booking, a strong US dollar, and reduced safe-haven demand.
2. Are gold and silver ETFs risky now?
They are volatile in the short term, but remain useful for portfolio diversification.
3. Should long-term investors sell gold ETFs?
Most experts suggest holding rather than selling in panic, especially for long-term goals.
4. Is this a good time to buy gold ETFs?
Gradual buying on dips may be considered, instead of lump-sum investment.
5. How much gold or silver should be in a portfolio?
Financial advisors generally recommend 5–10% allocation to precious metals.
Disclaimer
This article is intended for educational purposes only. The views and opinions expressed are those of individual analysts or brokerage firms and do not represent the views of GoldSilverReports.com. Investors are strongly advised to consult certified financial experts before making any investment or trading decisions.
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