Gold, Silver ETFs Sink Up To 5%: Why Are Global Precious Metal Prices Falling Today?

Gold and silver exchange-traded funds (ETFs) witnessed sharp selling pressure in early trade on Friday, mirroring weakness in international precious metal prices. Most gold ETFs were down around 2-2.5%, while silver ETFs plunged more than 5% as global investors reacted to a stronger US dollar and a hawkish US Federal Reserve outlook.

As of 9:55 am, ETF investors in India saw steep declines across both gold and silver funds, with silver ETFs bearing the brunt of the sell-off.

Gold ETFs Fall Over 2% Across The Board

Gold ETFs traded lower after international gold was on track for a third consecutive weekly decline. Among the major schemes, Nippon India ETF Gold BeES declined 2.44% to Rs 119.14 on the NSE, while SBI Gold ETF fell 2.53% to Rs 122.77.

ICICI Prudential Gold ETF slipped 2.50%

to Rs 123.23 and HDFC Gold ETF was down 2.37% at Rs 123.10. Mirae Asset Gold ETF dropped 2.44% to Rs 140.10, while Birla Sun Life Gold ETF declined 2.37% to Rs 126.87.

Other gold ETFs also remained under pressure. Tata Gold ETF fell 2.30% to Rs 14.01, Groww Gold ETF lost 2.29% to Rs 14.08, Zerodha Gold ETF dropped 2.45% to Rs 22.66 and Angel One Gold ETF declined 2.03% to Rs 13.48.

The weakness follows a decline in international bullion prices, which have been hit by rising expectations that US interest rates could remain higher for longer.

Silver ETFs Crash More Than 5%

Silver ETFs witnessed even steeper losses, reflecting a sharp correction in global silver prices. Nippon India Silver ETF fell 5.17% to Rs 218.10 on the NSE, while HDFC Silver ETF dropped 5.31% to Rs 217.69. ICICI Prudential Silver ETF was down 5.27% to Rs 227.70 and SBI Silver ETF declined 5.17% to Rs 223.19.

Axis Silver ETF slipped 5.26% to Rs 226.38, Zerodha Silver ETF lost 5.28% to Rs 23.16 and Kotak Silver ETF fell 5.23% to Rs 22.11. Meanwhile, Tata Silver ETF dropped 5.18% to Rs 22.13, Groww Silver ETF declined 5.14% to Rs 22.35 and Angel One Silver ETF lost 4.68% to Rs 8.75.

The broader weakness in silver ETFs came after international silver prices recorded a sharper fall than gold, amplifying losses for domestic ETF investors.

Why Are Gold And Silver Prices Falling?

In the international market, spot gold fell 1.1% to $4,163.93 per ounce on Friday and was down more than 1% for the week. US gold futures for August delivery slipped 1.5% to $4,181.20 per ounce.

The key trigger behind the decline has been the resurgence of the US dollar, which climbed to a one-year high. A stronger dollar makes gold and silver more expensive for holders of other currencies, reducing demand for precious metals.

Adding to the pressure, the US Federal Reserve adopted a more hawkish tone, with policymakers signalling that interest rates may need to remain elevated to contain inflation. According to market expectations tracked by CME FedWatch, traders are increasingly pricing in the possibility of a US rate hike later this year.

Higher interest rates typically hurt gold because the metal does not generate interest income, making yield-bearing assets relatively more attractive.

Goldman Sachs Cuts Gold Forecast

Sentiment toward gold was further weakened after Goldman Sachs lowered its year-end gold price forecast to $4,900 per ounce from its earlier estimate of $5,400. The investment bank also said it no longer expects the Federal Reserve to cut interest rates this year.

Market participants are now closely tracking upcoming US economic data and Federal Reserve commentary for clues on the future path of interest rates, which could determine the next move in gold and silver prices.