Gold, silver ETFs plunge up to 19% as precious metals see historic rout

Gold, Silver ETFs crash

Gold exchange-traded funds (ETFs), tracking gold prices in India, witnessed a sharp sell-off on Sunday, February 1, following a massive correction in the global and domestic precious metal markets last Friday. 

 

Gold ETFs slid between 7 per cent and 16 per cent in the intraday trade on the National Stock Exchange (NSE) today.

 

Among individual ETFs, Baroda BNP Paribas Mutual Fund's Baroda BNP Paribas Gold ETF plummeted 16 per cent, while Edelweiss Gold ETF tanked 15.9 per cent.

 

Motilal Oswal Gold ETF, ICICI Prudential Gold ETF, Tata Mutual Fund Tata Gold Exchange Traded Fund, LIC MF Gold, Aditya Birla Sun Life Gold ETF, Zerodha Gold ETF, Groww Gold ETF, Angel One Gold ETF, and UTI Gold Exchange Traded Fund crashed between 12 per cent and 15 per cent. 

 

 

The carnage in Gold ETFs follows a record-breaking rally in the yellow metal earlier this month. On the Multi Commodity Exchange (MCX), gold futures for February delivery plummeted by 8.8 per cent in the early trade on February 1 to hit a low of ₹1,38,894 per 10 grams.

 

This comes after Gold futures sunk ₹20,000 to settle around ₹1.49 lakh per 10 grams -- a 12 per cent one-day drop – on Friday. Overall, Gold prices have weakened by more than ₹37,574 from its peak of ₹1,80,779 per 10 grams, hit on Thursday. 

 

Silver ETFs, too, edged lower in trade on the NSE on Sunday. Bandhan Silver ETF dropped 19 per cent, while Mirae Asset Silver ETF dropped 16.8 per cent on the NSE. Nippon India Silver ETF was also down 11.8 per cent. 

 

Bandhan Silver ETF, Mirae Asset Silver ETF, Motilal Oswal Silver ETF, HDFC Silver ETF, 360 ONE Silver ETF, and Zerodha Silver ETF, meanwhile, fell between 3 per cent and 8.5 per cent.

 

Silver futures for March delivery saw a decline of 9 per cent on the MCX today, after shedding over ₹1.10 lakh to settle at ₹2.91 lakh per kg, down approximately 26.5 per cent, on Friday.

 

Silver futures for March expiry dropped by 9 per cent on February 1 to trade at ₹2,65,652 on MCX. 

 

Market analysts attribute the crash to a combination of factors. The primary trigger was the nomination of Kevin Warsh as the next US Federal Reserve Chair, which has fuelled speculation of a more hawkish monetary policy and higher interest rates. This led to a sharp rebound in the US Dollar Index, making dollar-priced commodities more expensive.

Commodity brokers feel the heat

Calling this record crash in gold and silver prices a “rare” event, Zerodha founder and CEO Nithin Kamath said these are the days when risk management doesn't work, and markets move so violently that traders lose more than their entire initial margin. 

 

He further said that over the past 16 years, he has seen something like this only once before: when Crude oil closed at a negative price during Covid-19. 

 

“But that was just one commodity, and commodity trading wasn't nearly as popular as it is today... However, what happened in commodities can happen in equities too; we saw it in 2008,” he cautioned in a social media post on ‘X’ (formerly Twitter).

Lessons from crash in Gold, Silver prices

As Gold, Silver ETFs hit lower limits today, Nithin Kamath urged investors to trade only with the money they could afford to lose. 

 

“You can trade successfully for a decade and lose it all in a single day if you're not properly managing risk. There's no margin call, no exit opportunity when markets gap through circuits like this,” he said.