Silver ETFs Sink Up to 18% as Precious Metals Rally Loses Steam
A sharp reversal in precious metals prices rattled commodity-linked investments on Thursday, with silver exchange-traded funds (ETFs) plunging up to 18% and gold ETFs falling around 5%. The decline came as gold and silver futures on the Multi Commodity Exchange (MCX) witnessed heavy selling, erasing gains from the previous two sessions.
The sudden fall surprised many short-term traders who had turned optimistic after a brief rebound in bullion prices. Instead, Thursday’s session highlighted how quickly momentum can fade in volatile commodity markets. For investors holding gold and silver ETFs as hedges or tactical bets, the correction translated into notable mark-to-market losses.
Gold and Silver Prices See Sharp Correction on MCX
The weakness in ETFs mirrored the fall in underlying futures prices. On MCX, gold futures for April expiry dropped about 3% to ₹1,48,455 per 10 grams. Contracts for June delivery also fell by a similar margin, showing broad-based selling across maturities.
Silver saw a far steeper correction. Silver futures for March expiry plunged 11% to ₹2,39,000 per kilogram, while May contracts also declined around 11%. Such double-digit moves in a single session are relatively rare in bullion and indicate aggressive unwinding of positions.
Market participants said the fall reflects a mix of profit booking, global cues and shifting expectations around US monetary policy. After a strong run-up earlier, precious metals had entered overbought territory, making them vulnerable to corrections.
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Silver ETFs Bear the Brunt as Prices Correct
Silver ETFs reacted sharply to the fall in futures prices. Kotak Silver ETF dropped nearly 18%, making it one of the biggest losers in the commodity ETF space for the day. Edelweiss Silver ETF fell over 15%, while several others—including funds from Mirae Asset, UTI, Axis, ICICI Prudential and HDFC—declined 12–14%.
Gold ETFs also slipped, though the damage was comparatively limited. Motilal Oswal Gold ETF declined around 5.5%, while ETFs from Edelweiss, DSP, SBI, Axis and ICICI Prudential fell roughly 5%.
The sharp fall highlights the direct linkage between ETF prices and underlying commodity futures. When bullion prices move quickly, ETFs tracking them reflect the same volatility almost instantly.
Global Data and Fed Rate Expectations Drive Sentiment
Analysts say global macro cues played a major role in Thursday’s correction. Markets are now focused on US ADP non-farm payroll data and services PMI readings from major economies. However, the primary trigger on traders’ radar is Friday’s official US jobs report, which could influence expectations on Federal Reserve rate cuts.
Kaynat Chainwala, AVP – Commodity Research at Kotak Securities, said:
“Markets are now focused on US data, but the main focus remains on the official US jobs report for signals on the timing of the next Federal Reserve rate cut.”
She added that CME FedWatch currently shows no easing priced in until May, with June reflecting only a narrow probability of a 25-basis-point cut. Higher-for-longer rate expectations typically weigh on gold and silver because they raise the opportunity cost of holding non-yielding assets.
Analysts Call It a Cooling Phase, Not a Trend Reversal
Some market experts view the sell-off as a healthy correction rather than the start of a prolonged downtrend.
Abhinav Tiwari, Research Analyst at Bonanza, described the move as a “flash crash” triggered by a hawkish US Fed nominee and increased margin requirements.
“This is viewed by many as a necessary cooling of overbought markets rather than a trend reversal,” he said.
He noted that the long-term outlook for precious metals remains structurally supportive due to central bank buying, silver’s supply deficit and ongoing geopolitical tensions.
Siddharth Srivastava, Head – ETF Product & Fund Manager at Mirae Asset Investment Managers (India), added:
“We have maintained a cautious stance on silver following its parabolic move and suggested trimming overallocation. Currently, we prefer gold from a relative risk-reward perspective.”
Here’s What Happened Today and Why Traders Reacted
Thursday’s price action was driven by fast-changing global cues and positioning adjustments. Traders who had built long positions during the rebound rushed to book profits as prices started slipping.
Key triggers behind the reaction:
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Profit booking after a two-day rebound
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Sharp fall in MCX silver futures
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US rate-cut expectations getting pushed out
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Hawkish global monetary signals
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Margin-related and technical selling
This combination created a swift correction, especially in silver-linked instruments, which are known for higher volatility than gold.
What This Means for Investors and Their Portfolios
For investors, the fall is a reminder that commodity ETFs can be volatile in the short term. While gold and silver are often seen as safe-haven assets, their prices still fluctuate based on global interest rates, currency moves and speculative positioning.
Portfolio impact and takeaways:
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Short-term investors may see sharp NAV swings
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Overexposure to silver can increase volatility
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Gold remains relatively more stable than silver
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Strategic allocation works better than tactical chasing
Long-term investors using gold and silver as diversification tools may not need to panic, but experts suggest avoiding excessive allocation after sharp rallies.
Overall, Thursday’s decline shows that precious metals are not one-way bets. For disciplined investors, such corrections can be part of a broader cycle—but only when allocations align with risk tolerance and long-term strategy.
