Gold, silver ETFs extend fall; BSE shifts to T-1 price band amid volatility

Gold and silver ETFs extended their decline amid a sharp global sell-off in precious metals, prompting BSE to revise price band calculations to T-1 NAV to better reflect heightened market volatility

Gold and silver exchange traded funds (ETFs) declined on Sunday, tracking the slump in precious metal prices in international markets on Friday. Gold ETFs, which fell nearly 7 per cent during the session, have corrected about 18 per cent from their record highs on January 29.

 

The decline is steeper in silver ETFs, which were largely closed for trading on Sunday as they hit the lower circuit. The ETFs breached the 20 per cent lower circuit even as they declined just 10-15 per cent during the session. This is due to the difference in the way the bands are determined for ETFs vis-a-vis stocks.

 

ETFs are subject to a fixed ±20 per cent price band, with the base price derived from the net asset value (NAV) of two trading days earlier (T-2).

 

However, given the volatility, exchanges have moved to T-1 NAV for gold and silver ETFs price band calculations.

 

"In view of the volatility in underlying gold and silver prices, reference price for gold and silver ETFs traded on the exchange shall be based on the T-1 NAV as published by the respective mutual funds. Accordingly, the prescribed price band of +/- 20 per cent shall be applicable to the said T-1 NAV price for trading purposes," BSE said in a circular on Sunday.

 

Gold and silver prices have pulled back in the last few sessions after a strong rally. On Friday, international spot gold prices declined nearly 10 per cent, the sharpest single-day decline since 1983, after the US President Donald Trump announced his choice for Federal Reserve chair, while silver slumped nearly 30 per cent, its worst day on record. The strengthening of the US dollar as a result of Trump's announcement and profit taking were attributed as the key reasons behind the decline.