Silver, Gold ETF Prices Tank as US Fed Hikes Fear Dominates Market Selloff
Precious metals exchange-traded funds (ETFs) witnessed a steep downturn on Monday, driven by heightened concerns over potential interest rate hikes by the US Federal Reserve. Global investor sentiment took a sharp dip, leading to significant selloff across both gold and silver ETFs. Silver ETFs faced particularly severe pressure, falling in the range of 6% to 7%.Global Precious Metals ETFs Plunge Amid Rate Hike Fears
The volatility extended across major Indian listed commodities. Nippon India Silver ETF (SILVERBEES) dropped by 6.6 percent, reaching Rs 227.56. SBI Silver ETF saw a decline of 6.7 percent to Rs 232.80, while ICICI Prudential Silver ETF declined 6.5 percent to Rs 237.68.In the gold category, market sentiment reflected caution. Nippon India Gold BeES (GOLDBEES) fell 2.8 percent to Rs 124.19. SBI Gold ETF slipped 2.8 percent while ICICI Prudential Gold ETF declined 2.9 percent to Rs 128.41.
US Dollar Strength and Federal Reserve Outlook Trigger Selloff
The primary catalyst for the downturn was the reaction to strong US jobs data. This robust economic indicator fueled market expectations that the US Federal Reserve may maintain elevated interest rates through the remainder of the year. The possibility of a rate hike before the end of 2023 is now being actively priced into markets.A concurrently strengthening US dollar added considerable pressure on bullion prices globally. With the greenback nearing a two-month high, commodity assets denominated in dollars, such as gold and silver, became less appealing for international investors. This led to corrections across international precious metals markets.
Domestic MCX Market Declines Amid Geopolitical Tensions
The decline was mirrored in domestic commodities trading on the Multi Commodity Exchange (MCX). MCX gold traded at Rs 1,53,568 per 10 grams, marking a decline of Rs 1,826 or 1.17 percent. Meanwhile, MCX silver fell by Rs 6,466 or 2.6 percent to trade at Rs 2,42,071 per kg.The market pressure extended beyond interest rate concerns. Renewed hostilities in the Middle East contributed to oil price increases, raising fears that inflation could remain elevated. This environment limits the scope for monetary easing by central banks and affects the appeal of non-yielding assets. Gold and silver typically lose favor when real yields rise due to rising bond returns and cash returns.
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