Sell-off in gold, silver ETFs again: Why physical bullion behaves differently amid market turmoil

Gold and silver ETFs came under intense selling pressure on Friday, plunging by as much as 10%, after a sharp surge in the US dollar rattled global commodity markets. The spike in the dollar followed stronger-than-expected US January jobs data, which dampened expectations of near-term interest rate cuts by the US Federal Reserve, weighing heavily on precious metals.

Silver ETFs were hit the hardest during the session. Kotak Silver ETF led the decline, tumbling nearly 10% intraday to touch a low of ₹225.11. Edelweiss Silver ETF, SBI Silver ETF and Zerodha Silver ETF also saw steep losses, each falling by up to 9% during the day.

Gold ETF vs Silver ETFs

Gold-focused funds were relatively resilient but still registered sharp declines. Tata Gold ETF fell the most, slipping around 6%, while SBI Gold ETF and Nippon India Gold ETF declined by roughly 4% each. By afternoon trade, Tata Silver ETF was quoted at ₹23.37, down 6.11% for the day. Nippon India Silver ETF slipped 6.24% to ₹230.07, while Zerodha Silver ETF declined 6.14% to ₹24.44. HDFC Silver ETF was trading at ₹229.67, down 6.50%.

The weakness was broad-based across silver ETFs. ICICI Prudential Silver ETF stood at ₹240.30, down 6.09%, while Groww Silver ETF traded at ₹23.55, lower by 6.25%. Aditya Birla Sun Life Silver ETF declined 6.07% to ₹240.17, and SBI Silver ETF slipped 6.33% to ₹235.22. UTI Silver ETF was down 6.36% at ₹231.82. Kotak Silver ETF, despite its sharp intraday fall, was trading at ₹233.10, lower by 6.55%. DSP Silver ETF stood at ₹231.41, down 6.36%, while Mirae Asset Silver ETF emerged among the worst performers, sliding 6.83% to ₹233.50.

Losses extended across the broader silver ETF universe. Axis Silver ETF was quoted at ₹239.10, down 6.04%, Edelweiss Silver ETF slipped 6.53% to ₹240.65, and 360 ONE Silver ETF declined 5.90% to ₹238.09. Bandhan Silver ETF fell 6.37% to ₹240.53, while Motilal Oswal Silver ETF dropped 6.47% to ₹238.18.

In contrast, international bullion prices staged a recovery later on Friday as bargain-hunting emerged following steep declines earlier in the week. Spot gold rose nearly 1% to $4,966.83 per ounce, rebounding from a more than 3% fall in the previous session that had dragged prices below the psychologically important $5,000 level. Spot silver climbed 2.1% to $76.76 per ounce, recovering from an 11% slump recorded on Wednesday.

Metal ETFs vs bullion fluctuations

Despite the rebound in global spot prices and gains seen in MCX and COMEX bullion futures, gold and silver ETFs in India remained under pressure through the session. Market participants attributed this divergence to a temporary disconnect between futures markets and ETF pricing, which could adjust by the close of trade.

Akhil Rathi, Head – Financial Advisory at 1 Finance, said: "During volatile market phases, physical gold and silver often behave differently from Gold and Silver ETFs because their pricing mechanisms are structurally different. Physical metals are tangible assets influenced by international spot prices, currency movements, import duties, taxes, and real-time local demand–supply conditions. In India, a weakening rupee could push domestic physical prices higher even if global prices remain stable. Additionally, fear-driven buying during crises can create higher local premiums due to strong retail demand, storage constraints, or temporary supply disruptions in the physical market."

He added: "ETFs, on the other hand, are exchange-traded financial instruments whose prices are largely based on underlying spot prices but are also influenced by stock market liquidity, investor flows, and trading sentiment. During sharp corrections, heavy buying or selling can cause ETFs to trade at a premium or discount to the underlying spot value. Another important factor is supply availability, when investors or traders are unable to get sufficient physical supply in the bullion market, they often move to ETFs for quicker exposure. This sudden shift in demand can widen the price gap, and recently we have seen silver ETFs trading at a noticeable premium due to strong demand and tight physical availability. Understanding these structural differences helps investors make informed allocation decisions rather than reacting emotionally to short-term price divergence."

Siddharth Srivastava, Head – ETF Product & Fund Manager at Mirae Asset Investment Managers (India), said: "Silver has historically been more volatile than gold. Its smaller asset base makes it more susceptible to speculative trading, which, when unwound, can lead to sharp corrections. Investors should focus on the long-term nature and potential of an asset class. Sharp corrections should neither be viewed as automatic investment opportunities nor as triggers for panic exits, without proper due diligence. Short term return comparison can often misguide investor by creating a use case to invest or redeem, without focussing on the long term behaviour, opportunity, risk and portfolio fitment of an asset class or fund in an investor's portfolio. In selecting Silver ETFs, primary importance should be given to liquidity on the exchange and a lower expense ratio. Additional filters may include tracking error and efficiency of ETF in tracking the underlying on exchange."