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Gold and silver exchange-traded funds (ETFs) witnessed sharp declines on Friday as weakness in global precious metal prices triggered heavy selling across the sector. While gold ETFs fell by around 2–2.5 per cent, silver ETFs suffered even steeper losses, dropping more than 5 per cent in early trade.
The decline comes amid growing concerns that higher US interest rates and a stronger dollar could continue to pressure precious metals in the near term.
Gold ETFs Trade Lower
Most gold ETFs opened sharply lower as international gold prices headed for a third consecutive weekly decline.
Among the major schemes:
- Nippon India Gold BeES fell over 2%
- SBI Gold ETF declined around 2.5%
- ICICI Prudential Gold ETF slipped about 2.5%
- HDFC Gold ETF dropped more than 2%
- Mirae Asset Gold ETF and other gold funds also traded in the red
The weakness reflects declining investor demand for gold following renewed strength in the US currency and changing expectations around interest rates.
Silver ETFs Witness Sharper Correction
Silver ETFs experienced an even bigger sell-off, significantly underperforming gold funds.
Major silver ETFs, including those offered by Nippon India, HDFC, ICICI Prudential, SBI, Axis and Kotak, registered losses of more than 5 percent.
The sharper decline in silver ETFs followed a substantial correction in international silver prices, amplifying losses for investors.
Why Are Precious Metals Falling?
Stronger US Dollar
One of the primary reasons behind the decline is the strength of the US dollar. When the dollar rises, gold and silver become more expensive for international buyers using other currencies, reducing overall demand.
A stronger dollar typically creates headwinds for commodity prices, particularly precious metals.
Hawkish Federal Reserve Signals
Investor sentiment was also impacted by the latest commentary from the US Federal Reserve. Policymakers signalled that interest rates could remain elevated for a longer period to ensure inflation remains under control.
Higher interest rates generally reduce the appeal of gold and silver because these assets do not generate regular income, unlike bonds and fixed-income investments.
Lower Rate Cut Expectations
Markets are increasingly pricing in the possibility that the Federal Reserve may delay interest rate cuts, keeping borrowing costs high and limiting support for precious metals.
Goldman Sachs Lowers Gold Forecast
Adding to the negative sentiment, investment bank Goldman Sachs reportedly reduced its year-end gold price forecast and indicated that it no longer expects a US rate cut this year.
The revised outlook further dampened investor confidence and contributed to the ongoing correction in precious metal prices.
What Should Investors Watch?
Market participants are now closely monitoring:
- Upcoming US inflation data
- Federal Reserve policy statements
- Dollar index movements
- Global economic growth trends
- Geopolitical developments
These factors will likely determine the next direction for gold and silver prices.
Long-Term Outlook Remains Intact
Despite the current correction, many analysts continue to view gold as an important portfolio diversifier and hedge against long-term economic uncertainty. However, short-term volatility is expected to remain high as investors reassess interest rate expectations and global economic conditions.
For ETF investors, experts advise focusing on long-term investment goals rather than reacting to short-term price fluctuations.