Gold ETFs crash 16% on stronger dollar, silver ETFs follow suit. What should investors do?

Gold and silver continued their sharp selloff on MCX, with futures sliding 6% at the open on February 1, dragging gold ETFs down by as much as 16% in early Friday trade.

Gold futures for April delivery slid 6%—down Rs 9,140 per 10 grams—to open at Rs 1,43,205, extending a sharp three-session decline of almost Rs 50,000 per 10 grams (26%) from the recent record high of Rs 1,93,096.

Profit-taking and a strengthening US dollar emerged as the key drivers behind the sharp correction.


Baroda BNP Paribas Gold ETF, Edelweiss Gold ETF, and Motilal Oswal Gold ETFs fell upto 16% on the budget day. LIC MF Silver ETF went down by 15% in the same time period.

Ponmudi R, CEO of Enrich Money, a SEBI-registered online trading and wealthtech firm said that near-term caution is warranted due to dollar strength and volatility, but medium-to-long-term forecasts stay firmly bullish.

On Friday, silver plunged as much as 27% (Rs 1,07,968), marking its biggest single-day crash ever and pulling prices back below the Rs 3 lakh mark—just a day after the metal had surged to a record high of Rs 4 lakh.

Gold prices tanked up to 12%, or Rs 20,514, in a single day on January 30, marking their worst one-day rout since March 2013, when prices had fallen 9% on the MCX.

The drop in bullion prices came after US President Donald Trump appointed Kevin Warsh as the new Federal Reserve Chair, triggering the dollar’s strongest single-day rally since May last year. The surge pushed the US Dollar Index back above 97 as concerns over central bank independence eased.

What should investors do?

Siddharth Srivastava, Head - ETF Product & Fund Manager, Mirae Asset Investment Managers (India) shared with ETMutualFunds that we have maintained a cautious stance on silver following its parabolic move and have suggested trimming overallocation to precious metals to realign portfolios with long-term strategic allocation levels.

Srivastava further added that while it is prudent to wait for further information and trend confirmation, we currently prefer gold from a relative risk-reward perspective.

Akshat Garg, Head Research & product of Choice Wealth said that today’s sharp fall in gold and silver ETFs looks scary on the screen, but it’s more of a sentiment shock than a story-breaker. Precious metals had run up sharply over the last year, and what we’re seeing now is a mix of profit-booking, global volatility and reaction to macro cues. ETFs tend to exaggerate moves on such days, both up and down.

Garg further added that for investors, this isn’t a moment for panic. Gold and silver are portfolio hedges, not trading bets and if your allocation is sensible, staying put makes sense, if anything, staggered buying during corrections works better than chasing rallies. Volatility hurts emotions, not long-term plans.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)