Gold & Silver ETFs Plunge Amid Global Uncertainty; Premiums Take Heavy Hit Following Major Corrections

Gold & Silver ETFs Plunge Amid Global Uncertainty; Premiums Take Heavy Hit Following Major Corrections​

India's precious metal exchange-traded funds (ETFs) faced a sharp reversal in investor sentiment during May. Silver commodity funds recorded their fourth consecutive month of outflows, while gold ETFs registered net redemptions for the first time in an entire year. These reversals were driven by steep price corrections and the introduction of new import duty measures.

Plummeting Outflows in Precious Metal ETFs​

Silver ETFs saw significant capital attrition during May, recording cumulative outflows totaling Rs 2,133.15 crore. This trend follows losses recorded in April (Rs 126.7 crore), February (Rs 826.3 crore), and March (Rs 683.91 crore).

Gold ETFs also experienced a notable swing, recording an outflow of Rs 5,178.63 crore in May. This contrasts sharply with April when the category had attracted substantial capital amounting to Rs 3,040.31 crore.

Global Macro Factors Fuel Bullion Decline​

The primary trigger for the correction has been rapid price action across both metals. Silver has fallen nearly 30 percent since late February, despite prior surges over a two-year period. Gold has fared little better, sliding more than 21 percent from its March peaks.

Global market pressures have significantly weighed on bullion assets. Factors such as a stronger dollar and rising bond yields are forcing a broad selloff in the international market. Furthermore, expectations that the US Federal Reserve could maintain elevated interest rates globally add strain to investor sentiment.

Geopolitical Instability Intensifies Market Fear​

Escalating tensions between the United States and Iran have added considerable uncertainty to global markets. While such geopolitical stress often signals increased safe-haven demand for gold, investors are currently focusing on inflation concerns associated with the conflict. This has stirred fears that central banks may be compelled toward tighter monetary policy policies for an extended period.

The sharp price corrections in bullion assets have also highlighted the mark-to-market impact on fund holdings. A significant component of the decline in Assets Under Management (AUM) reflects this price erosion rather than solely outright investor redemptions.

Expert Viewpoints and Long-Term Strategy​

Mutual Fund experts note that many investors who entered early are now booking necessary profits amid limited visibility regarding near-term price direction. However, silver continues to be supported by both industrial and investment demand globally.

Anup Bhaiya of Money Honey Financial Services suggested that predicting when outflows will cease remains challenging given the uncertain short-term price movements. For silver specifically, a further move towards the $50-$60 range from its current $65-$70 band could attract fresh buying interest.

Regarding gold, Mr. Bhaiya added that prices in the $4,200-$4,300 range are unlikely to face a significant decline. This stability is underpinned by global geopolitical developments, de-dollarisation trends and sustained central bank purchasing activity. Gold remains an asset where investors can gradually accumulate through Systematic Investment Plans (SIPs) if prices ease further.