Gold and Silver ETFs Bounce Back: Funds Show Stability After Significant Losses
After experiencing a dramatic decline of nearly 20%, gold and silver exchange-traded funds (ETFs) managed to recover some losses on Monday. The Bombay Stock Exchange (BSE) responded to the heightened volatility by imposing trading limits on these ETFs. This action followed a significant sell-off from record highs, which led to substantial price fluctuations in the bullion markets and related ETFs.
Trading Limits Imposed by BSE
In light of the recent market turmoil, the BSE implemented a 20% circuit limit on gold and silver ETFs. This measure was introduced to stabilize trading amid the sharp price drops. For the current trading session, ETF prices are now linked to the previous day’s net asset value (T-1 NAV), allowing trading only within a range of plus or minus 20%. Earlier in the session, both gold and silver ETFs experienced a nearly 20% crash before partially recovering by mid-trade. Some ETFs, such as the Zerodha Gold ETF and Nippon India Gold ETF, initially fell by as much as 9% but later rebounded to trade around 5% lower. The Axis Silver ETF hit its lower circuit limit before bouncing back nearly 10%, while the Edelweiss Silver ETF also saw a significant drop of close to 20% before recovering to Rs 232.17.
Significant Market Losses
The recent sell-off has resulted in substantial losses for investors. On February 1, silver prices plummeted nearly 9%, erasing approximately Rs 1.35 lakh in value over just two days, while gold prices dropped by more than Rs 31,000 in the same timeframe. Notably, on January 30, silver experienced its worst-ever crash on the Multi Commodity Exchange (MCX), plunging up to 27% in a single day and falling below the Rs 3 lakh mark just a day after reaching a record high of Rs 4 lakh. Gold also faced a sharp decline, dropping as much as 12% in a single day, marking its most significant one-day fall since March 2013. Jigar Trivedi, a senior research analyst at IndusInd Securities, noted that silver had fallen over 6% to about $79 an ounce and remained under pressure as markets continued to digest the previous Friday’s 26% crash, which was the sharpest single-day decline on record.
Market Influences and Future Predictions
The recent volatility in gold and silver prices can be attributed to a combination of factors, including ongoing geopolitical and economic uncertainties. Concerns regarding the independence of the US Federal Reserve have also contributed to silver’s status as a safe haven. However, the momentum-driven buying, particularly from Chinese speculators, initially fueled the rally, which later intensified the sell-off as investors rushed to secure profits. Looking ahead, Trivedi predicts that MCX silver March contracts may decline further, potentially reaching Rs 2,45,000 per kg, as the global sell-off in silver has not yet fully played out. The market remains cautious as investors navigate these turbulent conditions, with many closely monitoring the actions of the US Federal Reserve and other global economic indicators.
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