Gold, silver ETFs crash up to 8% as US Fed rate hike expectations climb. What should investors do?

Gold and silver ETFs fell nearly 8% on Monday as gold and silver prices opened sharply lower on the Multi Commodity Exchange (MCX), extending their losses for a fourth consecutive session. The sell-off came after US Federal Reserve Chair Kevin Warsh’s comments raised expectations of higher interest rates.

Gold ETF price

Out of 26 gold ETFs, Aditya Birla Sun Life Gold ETF slipped 8% to the day’s low of Rs 129.11, followed by Quantum Gold ETF, which fell 5%. Nippon India ETF Gold BeES, the largest gold ETF based on assets managed, fell 4% to its day’s low of Rs 126.08.

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Some other gold ETFs, including HDFC Gold ETF, Zerodha Gold ETF, SBI Gold ETF and Baroda BNP Paribas Gold ETF, fell around 4% each. Angel One Gold ETF, LICMF Gold ETF, Bandhan Gold ETF, Choice GOLD ETF and HSBC Gold ETF declined around 3% each.

Silver ETF price

There were nearly 19 silver ETF, of which Nippon India Silver BeES, Tata Silver ETF, Zerodha Silver ETF, Kotak Silver ETF, DSP Silver ETF, Groww Silver ETF, and Quant SIlver ETF crashed upto 5% each.

Other 12 silver ETFs such as HDFC Silver ETF, SBI Silver ETF, UTI Silver ETF, Axis Silver ETF, Edelweiss Silver ETF went down 4% each.

Why are gold and silver ETFs down?

Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance told ETMutualFunds that Gold and silver are retreating after a rapid increase, as some investors take profits and shifting rate expectations and a stronger US dollar are also pressuring both metals.

Minocha further said that silver is typically more volatile than gold, as 50% of its usage is in industry, so declines may appear more abrupt.

In the domestic market, MCX silver futures for September 2026 delivery were down Rs 3,635 to Rs 2,38,809 per kg. Gold futures for October 2026 delivery fell by Rs 2,700 to Rs 1,53,640 per 10 grams. Gold has fallen Rs 5,000/10 grams in 4 straight sessions. Gold has tanked Rs 9,500 in 4 days, while the white metal is down Rs 7,700 in three sessions.

The U.S. central bank will "have work to do" if policymakers do not gain sufficient confidence that inflation is moving towards the 2% target, Warsh said on Friday. His comments came closer than before to acknowledging that interest rate hikes could be required to bring down price pressures.

Markets are now pricing in a 57% chance of a rate hike at the Fed's September meeting, up from 30% before Warsh's remarks, according to the CME FedWatch tool. Higher interest rates tend to weigh on gold as they make holding the non-yielding asset less attractive.

Investors will also be watching a series of U.S. labour market data due this week, including job openings, the ADP employment report, weekly jobless claims and nonfarm payrolls.

Spot gold was flat at $4,455.29 per ounce after touching its lowest level since August 19 earlier in the session. U.S. gold futures for December delivery fell 0.6% to $4,504.90. Among other precious metals, spot silver was flat at $66.34 per ounce, while platinum rose 0.1% to $1,822.46. Palladium gained 0.2% to $1,424.89.

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What should investors do now?

Minocha said that this pullback is not a reason to panic or liquidate the holdings. If the allocation remains on target, investors should maintain their strategy. If the allocation exceeds target, they should consider rebalancing. New investors should consider spreading purchases over time rather than attempting to time the market.

Manoj Kumar Jain of Prithvi Finmart said on the MCX, gold has support at Rs 1,55,000-1,53,350 and resistance at Rs 1,57,500-1,58,850, while silver has support at Rs 2,40,000-2,37,700 and resistance at Rs 2,45,000-2,48,500.

Jain advised traders to wait for some stability before taking fresh positions in gold and silver, while long-term investors could accumulate the metals in a staggered manner during the market fall.

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

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