Gold and silver exchange-traded funds (ETFs) came under sharp selling pressure on January 30, tracking a steep correction in precious metal prices after a record-setting rally.
Gold futures with April expiry
on the Multi Commodity Exchange (MCX) slid around 5 per cent to about Rs 1,75,100 per 10 grams. This marked a sharp reversal from a day earlier, when the contract had touched a lifetime high of Rs 1,93,096 per 10 grams. Gold contracts with February and June expiries also declined by nearly 6 per cent each during early trade.
Silver futures mirrored the fall, with the March contract dropping about 6 per cent to Rs 3,75,900 per kilogram. Contracts expiring in May and July were also down around 6 per cent each.
ETFs take a hit
The sharp correction in futures spilled over into ETFs tracking the metals. Nippon India ETF Gold BeES, which has delivered returns of over 100 per cent in the past one year, fell around 10 per cent to trade near Rs 132 per unit. ICICI Prudential Gold ETF dropped close to 10 per cent, while Axis Gold ETF declined about 9 per cent.
Other gold ETFs such as UTI Gold ETF, Edelweiss Gold ETF, HDFC Gold ETF, Quantum Gold ETF and DSP Gold ETF also saw significant declines.
Silver ETFs witnessed even steeper losses. Mirae Asset Silver ETF fell about 13 per cent, while Motilal Oswal Silver ETF dropped nearly 12.5 per cent to Rs 330.01 per unit. HDFC Silver ETF and Nippon India Silver ETF plunged more than 14 per cent each. Aditya Birla Sun Life Silver ETF, Groww Silver ETF, ICICI Prudential Silver ETF, Axis Silver ETF, UTI Silver ETF, Tata Silver ETF and Kotak Silver ETF also declined sharply.
What triggered the sell-off?
The fall in domestic prices followed a sharp correction in global markets amid speculation that the next chair of the US Federal Reserve could adopt a more hawkish stance. Spot gold dropped about 5 per cent on Friday, a day after hitting a record high of $5,594.82 an ounce.
US President Donald Trump said he intends to announce his nominee to replace Fed Chair Jerome Powell, as speculation intensifies over who will lead the central bank after Powell steps aside in May.
“So, a potentially less dovish Fed Chairman pick, a rebound in the dollar and gold giving way to overbought conditions have contributed to the decline in the price of the precious metal,” Reuters quoted KCM Chief Trade Analyst Tim Waterer as saying.
“Rumours that Kevin Warsh will replace Jerome Powell as Fed Chair has weighed on gold during Asian trade,” Matt Simpson, Senior Analyst at StoneX, said, according to the report.
