Stuck with losses in Gold, Silver ETFs? Here's what investors should do

Silver ETFs plunged up to 20 per cent today, extending their rout into a third straight trading session. Gold ETFs, too, followed suit as Gold and Silver prices fell by 3-6 per cent on MCX today

Gold and Silver exchange traded funds (ETFs) are experiencing a major downturn, triggered by a massive correction in precious metals in both domestic and international markets. This slump follows a period of record-high prices, marking a sharp reversal for investors.

Silver ETFs bear the brunt

The record rout in gold and silver prices hit related ETFs up to 20 per cent on February 2, after sinking up to 17 per cent on February 1.  Silver ETFs sank up to 20 per cent on the National Stock Exchange (NSE) on Monday as global rout in silver prices hit sentiment. Edelweiss Silver ETF was locked in the 20 per cent lower circuit, while Kotak Silver ETF, DSP Silver ETF, Axis Silver ETF,  Aditya Birla Sun Life Silver ETF, and Groww Silver ETF dropped in the range of 18.5-19.9 per cent.  Tata Mutual Fund Tata Silver Exchange Traded Fund, 360 ONE Silver ETF, SBI SILVER ETF, Motilal Oswal Silver ETF, Axis Silver ETF,  ICICI Prudential Silver ETF, Mirae Asset Silver ETF, on the other hand, declined between 16 per cent and 18 per cent today.

 

The fall in Silver ETFs on NSE tracks an extended decline in Silver prices. MCX Silver futures, for March expiry, dropped 6.5 per cent to ₹2,48,500 per kg, afetr sliding 9 per cent on Sunday. MCX Silver prices had sunk 26.5 per cent last Friday.

 

Gold ETFs, too, followed suit. Motilal Oswal Gold ETF was the worst hit today, seeing an erosion of 7.7 per cent in net asset value (NAV).  Similarly, Aditya Birla Sun Life Gold ETF, ICICI Prudential Gold ETF, Edelweiss Gold ETF, 360 ONE Gold ETF, HDFC Gold Exchange Traded Fund, UTI Gold Exchange Traded Fund, and Baroda BNP Paribas Gold ETF declined in the range of 5-6 per cent. 

 

MCX Gold futures were down 3 per cent today, hitting a low of ₹1,43.321 per 10 grams. The prices of Gold futures on the MCX slipped nearly 9 per cent on Sunday, and 12 per cent on January 30. 

  ALSO READ | MCX shares tank 15% in trade; here's why investors are dumping the stock

Will Gold, Silver prices fall more?

According to analysts, the ₹1,43,000–₹1,45,000 zone continues to act as a strong support for MCX Gold. "A sustained hold above ₹1,50,000 could revive upside momentum toward ₹1,65,000–₹1,70,000, keeping the medium-term outlook constructive," said Ponmudi R, CEO, Enrich Money.

 

For MCX Silver, the ₹2,35,000–₹3,40,000 zone remains a critical base. Immediate resistance is seen near ₹2,90,000–₹2,92,000, with potential extension toward ₹3,25,000 if momentum sustains. Dips continue to offer accumulation opportunities for positional participants, he added.

Hit by losses in Gold, Silver ETFs? Here’s what investors could do:

When gold or silver ETFs hit their "lower circuit" on the stock exchange, liquidity usually dries up because there are many sellers but no buyers at the fixed price floor. Investors, unable to sell their units in the open market, may refer to these guidelines laid down by market regulator Securities and Exchange Board of India (Sebi), providing alternatives.

1. Direct redemption with the AMC

Standard exchange trading happens between investors. However, Sebi regulations allow investors to bypass the stock exchange and go directly to the Asset Management Company (AMC) under specific "liquidity windows." 

Investors may choose this option if their ETF units are trading at a significant discount to the Net Asset Value (NAV) or if there are no buyers on the exchange (e.g., during a circuit filter hit). 

Here, investors can put in a redemption request directly with the fund house. The AMC will cancel your units and pay out the value based on the day's actual NAV of the underlying metal. 

Notably, while large institutional investors (Authorized Participants) do this regularly in "basket sizes," retail investors are also permitted to approach the AMC directly during periods of low liquidity or when the exchange price deviates significantly from the NAV. 

"If investors want to redeem their silver units, a better way to do would be to go to an AMC, especially if they were buying silver as a speculative bet. However, if they were trying to buy silver as a long-term precious metal exposure, then investors just need to handle this rout calmly by taking a decision on the basis of their asset allocation and how much they really want to have as exposure to silver," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

2. Market orders vs limit orders

Investors should avoid placing ‘market orders’ during circuit hits as it might not execute at all, or it might execute at an unfavorable price the moment the circuit resets.  Instead, investors may use ‘limit orders’ and wait to see if any buyers enter the market later in the session.

3) Square off leveraged trades

Investors, who used leverage to trade in silver, should try to square off/close their positions given the sharp drawdown in the prices.  

"This type of commodity exposes investors to this kind of risk. And therefore, investors should try to close off their positions as quickly as possible. However, investors who are using ETFs or fund of funds (FoFs) to build this exposure are better off in this market," Dhawan said.