Explained: Why gold, silver ETFs crashed up to 23% and should you buy the dip?

Gold and silver exchange-traded funds (ETFs) plunged as much as 23% on Friday as investors rushed to book profits after precious metals retreated sharply from record highs, raising questions about whether this selloff presents a buying opportunity or signals the end of the historic rally.

The crash came after an extraordinary run that saw silver surge 42% in January, on track for its best-ever monthly performance, while gold posted its largest monthly advance since January 1999 with gains exceeding 15% in USD terms.

The carnage in numbers

SBI Silver ETF crashed 22%, while Zerodha Silver ETF, Nippon India Silver and Kotak Silver ETF plummeted up to 20%%. Gold ETFs weren't spared either Nippon India Gold ETF fell 11%, ICICI Prudential Gold ETF dropped 8%, and ICICI Prudential Silver ETF declined 23%.

In the international market, gold prices scaled a record peak of $5,594.82 on Thursday and is still on track for a more than 15% gain this month, heading for a sixth straight monthly gain and largest since 1999. Among other precious metals, spot silver was down 14.1% at $99.77 an ounce after hitting a record $121.64 on Thursday. The metal has surged 42% this month, on track for its best monthly performance.

What triggered the crash in gold and silver?

The sharp reversal came after US President Donald Trump said on Thursday he intends to announce his pick to replace Fed Chair Jerome Powell on Friday, with reports suggesting former Fed governor Kevin Warsh as the likely choice.

“So, a potentially less dovish Fed Chairman pick, a rebound in the dollar, and gold giving way to overbought conditions have contributed to the decline in the price of the precious metal,” explained KCM Chief Trade Analyst Tim Waterer.

The speculation about a more hawkish Fed leadership spooked investors who had been betting on accommodative monetary policy. A stronger dollar following this news added further pressure, making dollar-denominated precious metals more expensive for holders of other currencies.

The dollar index, which measures the greenback against a basket of currencies, rose 0.4% to 96.60, trimming its weekly decline to 0.9%. Against the Swiss franc, the dollar strengthened 0.7% to 0.7699.

“Gold and silver show very high volatility, and prices dip from record high levels amid heavy profit-taking; safe-haven buying could support prices,” Manoj Kumar Jain of Prithvi Finmart said.

Jain noted that on Thursday, gold and silver had settled on a positive note in international markets, with gold April futures at $5,354.80 per troy ounce (up 0.27%) and silver March futures at $114.429 per troy ounce (up 0.79%). Domestic markets also closed positively, with gold February futures at Rs 1,69,403 per 10 grams (up 2.10%) and silver March futures at Rs 3,99,893 per kilogram (up 3.77%).

However, he explained that gold and silver prices tend to be highly volatile. Prices hit record highs in early trade, with gold crossing $5,600 per troy ounce and silver moving past $121 per troy ounce, before witnessing profit-taking from elevated levels.

Profit-booking intensified after Trump’s tweet criticising the Fed chair for not easing monetary policy, prompting traders to turn cautious at higher levels.
The rally that preceded the fall

Despite Friday’s selloff, the broader context remains bullish. Silver has extended its winning streak to nine consecutive months, while gold has notched a sixth straight monthly gain.

“Silver fell about 4% toward $110/oz, retreating from all-time highs as investors locked in profits following the record rally, while, rebound in the dollar added pressure on the metal,” said Jigar Trivedi, Senior Research Analyst at Indusind Securities. “Despite the pullback, silver is on track to gain more than 50% in January, marking its best monthly performance on record and extending a winning streak to nine consecutive months.”

The rally has been fueled by persistent geopolitical and economic uncertainties, which boosted safe-haven demand, alongside a sharp depreciation in the dollar triggered by shifting policies in Washington and Trump's apparent indifference to the currency's weakness.

Trivedi added that “silver’s surge was further supported by a tight physical market, with both investment and industrial demand hitting record levels.”

What should gold, silver investors do?

Despite the selloff, the Street remains optimistic. UBS has raised its gold price target to $6,200 per ounce for March, June, and September 2026 from an earlier forecast of $5,000, citing stronger-than-expected demand driven by increased investment.

Jain noted that heightened US–Iran tensions and strong safe-haven buying continue to support precious metal prices, suggesting that the fundamental drivers of the rally remain intact. Market experts view the current correction as a buying opportunity rather than a trend reversal.

Jain believes silver could hold support at $98 per troy ounce and gold at $4,980 per troy ounce on a closing basis this week. “We expect gold and silver prices to remain volatile in today’s session amid fluctuations in the dollar index, ahead of the Indian Union Budget and ongoing geopolitical tensions,” he said.

For traders, Jain outlined key levels: gold has support at $5,220–5,110 and resistance at $5,480–5,555 per troy ounce, while silver has support at $110.00–106.60 and resistance at $118.00–123.00 per troy ounce in today’s session.

On the MCX, gold has support at Rs 1,65,500-1,61,100 and resistance at Rs 1,74,400-1,80,000, while silver has support at Rs 3,88,000-3,74,000 and resistance at Rs 4,10,000-4,22,000.

“We suggest buying gold on dips in the Rs 1,68,000-1,64,000 range, with a stop loss below Rs 1,61,100 and targetsof Rs 1,72,800-1,75,000,” Jain advised.

Trivedi sees support for MCX March silver prices at Rs 3,80,000 per kg, indicating a potential floor after the recent profit-booking.

The consensus among analysts is that while extreme volatility is likely to persist, the fundamental case for precious metals, driven by geopolitical risks, economic uncertainty, and safe-haven demand, remains strong. Friday’s sharp fall appears to be profit-taking after an overbought rally rather than a fundamental shift in market dynamics.