Silver ETFs fall up to 5% as high oil prices weigh on sentiment. What should investors do?

Silver ETFs fell by up to 5% on Thursday as rising crude oil prices and caution ahead of key US inflation data weighed on investor sentiment. Market participants are awaiting the US Consumer Price Index (CPI) report for clues about the Federal Reserve’s next interest rate move.

Among the 19 silver ETFs in the said time period, Motilal Oswal Silver ETF and Quant Silver ETF fell the most, by around 5%. Eight silver ETFs - Tata Silver ETF, ICICI Prudential Silver ETF, Zerodha Silver ETF, SBI Silver ETF, UTI Silver ETF, DSP Silver ETF, Mirae Asset Silver ETF and Groww Silver ETF lost up to 4%.

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The other nine silver ETFs, which included Nippon India Silver ETF, HDFC Silver ETF, Kotak Silver ETF, and Edelweiss Silver ETF, lost up to 3%.

Vikram Subburaj, CEO, Giottus, said Silver's decline is more pronounced. It has slipped towards Rs 2.08 lakh per kg, making the Rs 2.05–2.08 lakh zone important for near-term support. A recovery above Rs 2.19 lakh would be needed to signal a meaningful improvement.

Subburaj further said that the global interest-rate outlook remains a key driver. Stronger US inflation has reinforced concerns that the Federal Reserve may keep monetary policy restrictive for longer. A firm dollar and elevated Treasury yields tend to weigh on gold and silver because they increase the opportunity cost of holding non-yielding assets.

For Indian investors, currency movements add another layer of volatility. Rupee weakness can cushion domestic bullion prices when international prices fall, but it may not fully offset a sharp global correction, he also added.

On the Multi Commodity Exchange (MCX), silver December futures contracts were settled at $55.88 per troy ounce, down by 6.13%. Silver December futures contract settled at Rs2,08,338 per kilogram with a loss of 4.96%.

Among other precious metals, spot silver rose 1.1% to $56.26 per ounce, while platinum gained 0.3% to $1,611.15 per ounce and palladium climbed 1.3% to $1,107.83 per ounce.

Spot gold rose 1.3% to $4,158.63 per ounce as of 0257 GMT, recovering after hitting its lowest level since October 7 on Wednesday. US gold futures for December delivery gained 1.8% to $4,180 per ounce.

Manoj Kumar Jain, Prithvi Finmart said gold and silver prices crashed after hotter-than-expected U.S. September month inflation data increased Fed rate hike fears in October policy meetings and silver prices also slipped to nearly 3-month lows. However, news of unfreezing Russian assets by the U.S. to halt the Russia and Ukraine war could support gold and silver prices at lower levels.

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Jain further said that We expect gold and silver prices to remain volatile this week amid volatility in the crude oil prices, volatility in the dollar index and geo-political tensions and silver has support at $54.40-53.00, while resistance is at $57.40-59.10 per troy ounce in today’s session.

At MCX, silver is having support at 205500-202000 and resistance at 211000-214400. We suggest long-term investors must accumulate gold and silver in this market fall and even traders must avoid short selling at current levels as the market is in a highly oversold zone and a smart recovery is possible in gold and silver, Jain added.

(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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