Gold, silver ETFs plunge after record rally — is this a rare buying window or a trap for investors?
Gold and silver exchange traded funds (ETFs) witnessed a sharp selloff on January 22, jolting investors who had just seen these instruments touch record highs earlier this month. With some silver ETFs crashing as much as 21 percent intraday and gold ETFs sliding up to 12 percent before partial recovery, the big question dominating Dalal Street is simple: should investors buy the dip or stay cautious?
Market experts remain divided. While some view the correction as healthy profit-booking after an overheated rally, others argue that the long-term case for precious metals remains firmly intact.
What triggered the sudden crash in gold and silver ETFs today?
The fall in ETFs closely tracked the decline in spot gold and silver prices after global risk sentiment improved overnight. The immediate trigger came from US President Donald Trump’s latest comments on Greenland and tariffs.
Trump said he had reached the outlines of a deal with NATO regarding Greenland’s future and confirmed that previously threatened tariffs would not be imposed.
“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 his meeting with NATO Secretary General Mark Rutte.
He further clarified that the US would not use military force over Greenland.
“I won’t do that… I don’t have to use force, I don’t want to use force, I won’t use force,” he said.
These statements immediately eased geopolitical anxiety, triggered a shift back towards risk assets and led to sharp unwinding of safe-haven positions in gold and silver.
Justin Khoo, Senior Market Analyst – APAC at VT Market, summed it up succinctly:
“Today’s sharp slump in silver and gold ETFs, with some dropping as much as ~21%, reflects an abrupt shift in macro sentiment rather than a fundamental breakdown in precious metals.”
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How badly did gold and silver ETFs fall in the session?
The damage was particularly severe in silver ETFs, which tend to be more volatile than gold-linked products.
Key intraday moves included:
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Tata Silver ETF fell as much as 21% at the day’s low
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Birla Sun Life Gold ETF declined nearly 12% before recovering partially
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Several other silver ETFs saw double-digit intraday drawdowns
The selling pressure was also exacerbated by retail profit booking after the sharp multi-session rally seen earlier in January.
According to Khoo, the correction was largely technical.
“The ETF correction looks like profit-taking and risk rebalancing as equity markets rally. Spot gold and silver still remain at historically elevated levels.”
Here’s what happened today and why traders reacted
Market participants point out that this was not a structural collapse but a classic sentiment-driven unwind.
Traders reacted to three key developments:
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Easing of geopolitical risk after Trump softened stance on Greenland
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Withdrawal of tariff threats reduced immediate demand for safe-haven assets
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Strong rally earlier had left gold and silver ETFs in overbought territory
The result was a swift rotation out of precious metals into risk assets, triggering sharp intraday selling in ETFs.
Experts are split: buy the dip or wait for consolidation?
The investment community is clearly divided on the next move.
Tanvi Kanchan, Associate Director at Anand Rathi Share and Stock Brokers, said the debate is understandable.
“The market is divided between those viewing corrections as buying opportunities and those warning of overheated conditions.”
However, she believes the long-term story for precious metals remains compelling.
“Despite price swings, fundamentals are compelling, driven by near-record industrial demand from solar panels, electric vehicles, and AI infrastructure.”
She added that geopolitics continues to support the asset class.
“Given the current geopolitical landscape — from ongoing conflicts in the Middle East and Ukraine to US-China tensions — precious metals maintain their relevance as portfolio hedges.”
At the same time, she cautioned investors against aggressive lump-sum buying.
“After such explosive gains, timing a single entry point is treacherous. Rather than deploying capital all at once, investors should consider spreading purchases over weeks or months.”
Why volatility in silver ETFs is sharper than MCX silver
Harshal Dasani, Business Head at INVasset PMS, explained that the sharper fall in silver ETFs compared to MCX silver reflects unwinding of speculative premiums.
“Over the last two sessions, silver on MCX had significantly outperformed COMEX due to expectations around an import duty tweak in the Budget. That premium was sentiment-led. Once those expectations faded, the excess premium started unwinding.”
He added that ETF prices are also influenced by investor flows.
“When retail investors rush to book profits, ETF units face additional selling pressure even if futures are stabilising.”
This explains why ETF corrections often look more violent than movements in underlying commodities.
What impact does this move have on investor portfolios?
For investors heavily allocated to precious metals, the sharp fall can temporarily dent portfolio returns. However, most advisors still believe gold and silver should be viewed as hedging tools, not trading instruments.
Tanvi Kanchan advised a disciplined allocation approach:
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Allocate 5–10 percent of portfolio to precious metals
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Prefer systematic buying rather than lump-sum entries
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Use ETFs for liquidity and transparency
“For conservative investors, allocating 5–10% through systematic purchases reduces timing risk while maintaining exposure to an asset class that benefits from monetary policy uncertainty,” she said.
Is more volatility ahead in gold and silver?
Most experts agree that volatility is likely to persist.
Siddharth Maurya, Founder & MD at Vibhavangal Anukulakara, said:
“The drastic correction is a result of profit-booking and unwinding of risk-off trades. Although demand trends and supply gaps support metals, the current scenario indicates continued short-term volatility.”
Nirpendra Yadav, Senior Commodity Research Analyst at Bonanza, added that gold’s strategic role remains intact.
“With global uncertainties, central bank accumulation and expectations of softer real interest rates, gold continues to play an important portfolio-hedging and diversification role.”
The bottom line for investors watching this correction
The sharp fall in gold and silver ETFs is more about sentiment adjustment than structural weakness. While short-term volatility may continue, most experts agree that disciplined investors can use such corrections as an opportunity — but only with staggered allocation and realistic expectations.
For traders, momentum has clearly cooled. For long-term investors, however, the correction could still prove to be a strategic entry zone rather than the end of the precious metals story.
