- Gold and silver ETFs fell over 1% following stronger-than-expected US jobs data
- US rate hike expectations reduced demand for non-yielding gold and silver assets
- Domestic gold and silver prices remained stable despite ETF declines
Gold, Silver ETFs In Focus: Gold and silver ETFs were under pressure on Monday, with most precious-metal exchange-traded funds falling more than 1% as investors reacted to stronger-than-expected US jobs data and changing expectations around the Federal Reserve's interest-rate path.
Last checked, among gold ETFs, Invesco India Gold ETF fell as much as 1.46%, while Axis Gold ETF declined 1.44%, Quantum Gold ETF slipped 1.41%, ICICI Prudential Gold ETF dropped 1.33%, and SBI Gold ETF and Kotak Gold ETF declined 1.28% and 1.31%, respectively.
Nippon India Gold BeES fell 1.22% to Rs 125.62, while HDFC Gold ETF was down 1.22% at Rs 129.84 and UTI Gold ETF declined 1.20% to Rs 127.95. Birla Sun Life Gold ETF and IDBI Gold ETF were also lower by 1.24% and 1.12%, respectively.
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Among silver ETFs, ICICI Prudential Silver ETF declined 1.16% to Rs 229.79, while the fund was also seen trading at Rs 229.84, down 1.14%, according to the data available.
Why Are Gold, Silver ETFs Falling?
The correction in precious-metal ETFs comes as stronger-than-expected US jobs data has raised expectations that the Federal Reserve could keep interest rates higher for longer or even consider a rate hike. Gold and silver are non-yielding assets, making them less attractive when interest rates and real yields rise.
Investors are also awaiting key US inflation data later this week, with the Producer Price Index due Thursday and Consumer Price Index data due Friday. The readings could influence expectations around the Fed's next policy move.
The pressure in ETFs is notable because the underlying domestic commodity market was relatively stable around the time of the data. According to MCX latest data, gold was up 0.10% at Rs 1,52,917 per 10 grams, while silver was up 0.04% at Rs 2,37,761 per kg.
This divergence is important as new SEBI rules for ETF trading also came into effect from September 7. The revised framework changes how base prices and price bands are determined and introduces a pre-open call auction for ETFs, with the aim of improving price discovery and keeping ETF prices closer to their underlying values.
What Did The Expert Say?
According to Harshal Dasani, Business Head, INVAsset PMS, the decline should be viewed more as a reset in the underlying precious-metals trade than an ETF-specific issue.
“For Indian ETFs, currency also matters. A firmer rupee can amplify the decline in domestic gold and silver prices even when the correction in international bullion is relatively contained.”
Dasani said precious metals had seen a strong run earlier, leaving valuations and positioning with less room for disappointment.
“The key variables now are the dollar, real yields, geopolitical risk and the rupee. If those turn supportive again, precious metals could find a floor, but near-term volatility warrants caution.”
What Should Investors Watch Next?
The immediate focus for bullion investors will remain on US inflation data, the dollar and expectations around Fed policy. Stronger US economic data can push up rate expectations and weigh on non-yielding assets such as gold and silver.
For Indian investors, Dasani said the recent correction does not necessarily alter the longer-term case for precious metals, but the near-term setup warrants caution as currency movements, real yields and positioning could keep volatility elevated.
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