Gold, silver ETFs slide up to 3.5%: Time to buy the dip or stay cautious?
For investors with a long-term horizon, the correction could provide an opportunity to stagger purchases rather than deploy a large amount at once
For conservative investors, gold and silver can be considered on dips
Gold and silver exchange-traded funds (ETFs) came under sharp selling pressure on August 31, with several products falling up to 3.5 percent as precious-metal prices declined following hawkish comments from US Federal Reserve Chair Kevin Warsh. The sell-off has raised concerns among investors who have seen strong gains in precious metals and are now weighing whether the latest correction offers an opportunity to buy or signals further downside.
As of 12:22 pm IST, the latest market data showed silver ETFs falling by as much as 3.46 percent, while gold products declined by up to 3.40 percent. The sell-off came as bullion prices remained under pressure amid rising expectations of higher US interest rates.
Among silver-linked products, Kotak Silver ETF recorded the steepest fall, declining 3.46 percent. It was followed by Mirae Asset Silver ETF, which fell 3.40 percent, and Commodity-Silver, which declined 3.38 percent. UTI Silver ETF was the fourth-biggest loser, down 3.37 percent.
The fall was broad-based across silver products. HDFC Silver ETF declined 3.33 percent, SBI Silver ETF fell 3.31 percent, while Silver BeES and Tata Silver ETF were both down 3.25 percent.
Gold-linked ETFs were also trading lower, with Invesco Gold ETF emerging as the biggest loser among the gold products tracked in the data. It was down 3.40 percent at 12:22 pm. Union Gold, a commodity-gold product, followed with a 3.32 percent decline, while Axis Gold ETF fell 3.09 percent.
Other gold ETFs also remained in the red. SBI Gold ETF declined 2.84 percent, Goldman Sachs Gold ETF/GOLDIETF fell 2.83 percent, while Baroda BNP Paribas Gold ETF and Edelweiss Gold ETF declined 2.75 percent and 2.66 percent, respectively.
Besides, In the spot market, gold prices were also under pressure, with spot gold falling around 1.22 percent to Rs 1,54,940 per 10 grams, while silver futures on the MCX were down 0.57 percent at Rs 2,40,011 per kg, around the same time.
Why are gold and silver falling?
The weakness in precious metals comes amid growing expectations that the US Federal Reserve could keep interest rates higher. Recent comments from Fed Chair Kevin Warsh have strengthened expectations of higher rates, putting pressure on non-yielding assets such as gold and silver. The stronger dollar and higher yields can make precious metals relatively less attractive to investors.
What should investors do?
The sharp correction in gold and silver ETFs may prompt investors to consider buying the dip, but experts suggest avoiding a knee-jerk response to a single-day fall. While the long-term case for gold remains intact, near-term prices could remain volatile as markets assess the Fed’s interest-rate outlook, dollar movement and central-bank demand.
“After the Federal Reserve Chairman’s commentary, particularly around inflation, we are seeing some profit booking in gold and silver. Silver had run up significantly more than gold, so the correction in silver is sharper, with prices falling around 1 percent today,” said Kranthi Bathini, Director of Research at WealthMills Securities.
“However, given the long-term outlook for gold, we remain positive. In the short to medium term, central-bank buying has moderated compared with previous years, but we need to wait and watch how central-bank demand evolves,” he said.
For investors with a long-term horizon, the correction could provide an opportunity to stagger purchases rather than deploy a large amount at once. Silver, however, is likely to remain more volatile given its sharper recent run-up and greater sensitivity to industrial-demand expectations.
“For conservative investors, gold and silver can be considered on dips. As for the difference between spot prices and ETF prices, the situation is different from what we saw earlier. Last time, there was a strong frenzy to buy gold and silver, with too much money chasing these assets. That has now moderated compared with the earlier period,” added Bathini.
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