India’s gold exchange-traded funds (ETFs) crashed as much as 21 per cent on Thursday, January 22, amid easing tariff concerns. The decline followed a strong
rally in precious metals earlier, prompting investors and analysts to reassess whether the correction offers a buying opportunity or signals the need for caution. Tata Silver ETF dropped as much as 21 per cent to its day’s low, while Birla Sun Life Gold ETF fell 12 per cent before seeing some recovery in the day. However, the plunge of gold ETFs was not mirrored in the MCX or physical gold. What Led To The Sudden Fall? The immediate trigger in the gold ETFs came from comments made by US President Donald Trump at the World Economic Forum in Davos. Trump indicated progress on a potential understanding with NATO that could avert new tariffs. “Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on February 1st,” Trump wrote on Truth Social after a meeting with NATO Secretary General Mark Rutte. However, the US President did not disclose further details. In a separate statement, Trump also ruled out the use of force in relation to Greenland. “I won't do that,” Trump said. “Okay? Now everyone's saying 'oh, good' that's probably the biggest statement I made because people thought I would use force. I don't have to use force, I don't want to use force, I won't use force,” he said. Trump's remarks gave investors some relief regarding the geopolitical stress, which intially driven them towards the safe haven options for investment. Analyst Comments On ETFs Fall Market experts said that the ETF fall reflects sentiment changes. "Today’s sharp slump in silver and gold ETFs, with some dropping as much as ~21 per cent, reflects an abrupt shift in macro sentiment rather than a fundamental breakdown in precious metals," said Justin Khoo, Senior Market Analyst - APAC, VT Market, according to a Moneycontrol report. According to Khoo, the earlier rally was fuelled by fears of trade conflict and military escalation, which pushed investors into defensive assets like gold and silver. With equity markets rebounding and risk appetite returning, profit-booking and portfolio rebalancing have come into play. Should You Buy On Dip Or Wait? Tanvi Kanchan, Associate Director at Anand Rathi Share and Stock Brokers, noted that while some see the dip as an opportunity, others are wary after the strong run-up. “Given the current geopolitical landscape—from ongoing conflicts in the Middle East and Ukraine to US-China tensions and uncertainty around trade policies under the new Trump administration—precious metals maintain their relevance as portfolio hedges,” she said, as per the report. However, she cautioned against lump-sum investing after sharp gains. “Rather than deploying capital all at once, investors should consider spreading purchases over the coming weeks or months,” Kanchan advised, adding that staggered buying can help manage volatility.
