Gold and Silver ETFs Slide Amid Rising Fed Rate-Hike Bets; Silver Funds Lead Losses

Mumbai, June 8: Gold and silver exchange-traded funds (ETFs) came under heavy selling pressure on Monday, falling by as much as 6% as a sharp decline in precious metal prices weighed on investor sentiment. 

Silver ETFs bore the brunt of the selloff, with several funds witnessing steep losses after silver prices slumped in both domestic and international markets. Gold ETFs also traded lower as investors reduced exposure to precious metals amid rising expectations that the US Federal Reserve could keep interest rates elevated for longer. 

The decline mirrors weakness in underlying bullion prices, with both gold and silver extending losses after a strong US jobs report reinforced concerns that the Fed may need to maintain a tighter monetary policy stance.  

Check list of Gold ETFs in India 

Gold ETFs witnessed broad-based declines, with Nippon India ETF Gold BeES dropping 2.9% to ₹124.11, ICICI Prudential Gold ETF falling 3% to ₹128.37, SBI Gold ETF losing 3% to ₹127.94 and Tata Gold ETF slipping 2.8% to ₹14.58. 

The selloff was more pronounced in silver-backed funds. Nippon India Silver ETF tumbled 6.6% to ₹227.45, while SBI Silver ETF declined 6.7% to ₹232.72. ICICI Prudential Silver ETF fell 6.7% to ₹237.32 and Tata Silver ETF shed 6.6% to ₹23.08, reflecting the sharper correction in silver prices compared with gold. 

Strong dollar, higher yields hit bullion 

The primary trigger behind the selloff has been a sharp rise in the U.S. dollar and Treasury yields following stronger-than-expected U.S. employment data. 

Tata Gold ETF took a hit as a sharp decline in precious metal prices weighed on investor sentiment. Source: NSE 

Markets are increasingly pricing in the possibility of another Federal Reserve rate hike later this year after the U.S. economy continued to display resilience. According to market estimates, the probability of a Fed rate increase by December has risen significantly following the latest payrolls report. 

Higher interest rates tend to hurt gold and silver because the metals do not generate any yield. As bond yields rise, investors often shift capital toward interest-bearing assets, reducing the appeal of precious metals. 

A stronger dollar has added to the pressure. Since gold and silver are priced in dollars, a firmer greenback makes them more expensive for overseas buyers, weighing on demand and prices. 

Silver sees sharper correction 

Silver prices have witnessed a steeper decline than gold, leading to larger losses for silver-focused ETFs. 

Silver backed funds saw a steeper slide as SBI Silver ETF crashed after silver recorded higher volatility compared with gold. Source: NSE 

The white metal has come under pressure from a combination of profit booking, rising yields and a stronger dollar. International silver prices have fallen sharply from recent highs, prompting investors to reassess positions after a strong rally earlier this year.  

Market participants noted that silver’s higher volatility compared with gold often amplifies price swings during periods of uncertainty. As a result, silver ETFs have underperformed gold ETFs during the latest correction. 

Geopolitical tensions fail to support prices 

Ordinarily, rising geopolitical tensions would boost demand for safe-haven assets such as gold. However, the current market environment has been dominated by concerns over inflation and interest rates. 

Escalating tensions in the Middle East have pushed crude oil prices sharply higher, raising fears that inflation could remain elevated globally. Investors now worry that central banks may be forced to keep monetary policy restrictive for longer, outweighing gold’s traditional safe-haven appeal. 

While the near-term outlook for precious metals remains tied to U.S. economic data and Federal Reserve policy expectations, analysts believe volatility could persist as investors weigh inflation risks, geopolitical developments and the path of interest rates. 

Source

• NSE, https://www.nseindia.com/get-quote/equity/TATAGOLD/Tata-Mutual-Fund-Tata-Gold-Exchange-Traded-Fund, https://www.nseindia.com/get-quote/equity/SBISILVER/SBI-Mutual-Fund—SBI-SILVER-ETF