Gold, silver ETFs slide more than 3% as bullion prices tumble; expert says it's a volatility reset, not collapse

Silver exchange-traded funds (ETFs) plunged nearly 3.81 percent, while gold ETFs fell by as much as 2.72 percent on June 25, mirroring a sharp correction in domestic and global bullion prices as heightened volatility gripped precious metals.

Silver-backed ETFs bore the brunt of the selloff. Nippon India Silver ETF (SilverBeES) declined 3.81 percent to Rs 205.23, ICICI Prudential Silver ETF dropped 3.78 percent to Rs 214.05, SBI Silver ETF fell 3.76 percent to Rs 210.25, and Tata Silver ETF slipped 3.74 percent to Rs 20.85.

Gold ETFs also traded lower, although losses were comparatively milder. Among the major schemes, BNP Paribas Gold ETF declined 2.72 percent, Kotak Gold ETF lost 2.61 percent, Edelweiss Gold ETF fell 2.46 percent, SBI Gold ETF dropped 2.43 percent, while ICICI Prudential Gold ETF and Axis Gold ETF were down around 2.4 percent. Other gold ETFs, including those from HDFC, Nippon India, UTI, Mirae Asset and Aditya Birla Sun Life, also traded in the red with losses of roughly 2-2.3 percent.

Weakness in ETF prices

The weakness in ETF prices tracked a sharp decline in bullion prices on the Multi Commodity Exchange (MCX), where both gold and silver futures came under pressure.

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Silver futures witnessed extreme volatility at the opening bell. The July futures contract initially plunged by nearly Rs 3,000 to around Rs 2.10 lakh per kg, before staging a swift recovery to trade above Rs 2.15 lakh per kg within minutes. Despite the rebound, silver prices have fallen by around Rs 17,000 per kg over the first four trading sessions of the week.

Gold futures also opened sharply lower, with the August contract slipping to Rs 1,40,543 per 10 grams before recovering to nearly Rs 1,42,000. In morning trade, MCX gold futures were down 0.16 percent at Rs 1,41,220 per 10 grams, while MCX silver futures traded 0.96 percent lower at Rs 2,11,710 per kg.

Bullion prices

The decline in domestic bullion prices followed continued weakness in international markets. Spot gold extended losses after breaking below the $4,000-an-ounce mark for the first time in seven months. The precious metal remained under pressure as the US dollar stayed firm and investors increased bets that the US Federal Reserve could raise interest rates later this year to combat persistent inflation, reducing the appeal of non-yielding assets such as gold.

Commenting on the sharp correction, Harshal Dasani, Business Head at INVasset PMS, said the decline reflects a broader shift in market expectations rather than just a fall in bullion prices.

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"The correction in gold and silver ETFs is not just a bullion price move; it is a reset in the rate trade. Precious metals are reacting to a stronger dollar, rising US rate-hike expectations, and the unwind of crowded safe-haven positions after a sharp rally earlier in the cycle. Gold ETFs have corrected, but silver ETFs have underperformed because silver is a higher-beta metal. It carries both precious-metal demand and industrial-demand expectations, so when liquidity tightens and risk appetite fades, the fall is sharper," Dasani said.

He added that investors should distinguish between short-term volatility and the long-term investment case for precious metals.

"For Indian portfolios, this does not break the strategic case for gold. Gold still has a role as a currency hedge, geopolitical hedge, and portfolio diversifier. But the near-term risk-reward has turned more tactical than structural. When the market starts pricing higher real rates, non-yielding assets face valuation pressure. Silver needs even more discipline because its moves are amplified by positioning and industrial-cycle expectations. The lesson is not to abandon precious metals, but to separate allocation from momentum. Gold remains the cleaner defensive allocation. Silver can deliver sharper upside in a reflation cycle, but in a dollar-led tightening scare, it will also correct harder. This is a volatility reset, not a collapse in the long-term bullion thesis."