Gold, Silver ETFs Slide Up To 4% As Fed Rate-Hike Bets Hit Precious Metals

Gold and silver exchange-traded funds (ETFs) came under heavy selling pressure on Monday, August 31, with several silver-focused schemes falling around 4% in morning trade as precious-metal prices weakened on renewed concerns over US interest rates.

The decline in precious-metal ETFs was considerably sharper than the fall in the broader equity market, reflecting the pressure on global bullion prices following hawkish comments from US Federal Reserve Chair Kevin Warsh.

Silver ETFs Lead The Decline

Silver-linked funds bore the brunt of the selling in morning trade. Nippon India Silver ETF, or Silver BeES, fell 4.06% to ₹221.07, while SBI Silver ETF declined 4.05% to ₹226.55. Tata Silver ETF was down 3.98% at ₹22.44 and ICICI Prudential Silver ETF slipped 3.87% to ₹231.21.

Gold ETFs also moved lower, although the losses were relatively smaller. ICICI Prudential Gold ETF declined 3.59% to ₹130.75, while SBI Gold ETF fell 3.50% to ₹130.30. Nippon India ETF Gold BeES was down 3.48% at ₹126.30 and Tata Gold ETF declined 3.19% to ₹14.87.

What Triggered The Gold, Silver Sell-Off?

The latest pressure on precious metals followed comments by Warsh at the Federal Reserve's annual Jackson Hole conference.

Warsh reiterated the central bank's commitment to bringing inflation back to its 2% target. The remarks strengthened expectations of tighter US monetary policy, with traders now pricing in a more than 50% probability of a rate increase at the Fed's September meeting.

Gold and silver, which do not offer regular interest income, typically come under pressure when expectations of higher interest rates and bond yields increase. Higher yields can make interest-bearing assets more attractive relative to precious metals.

Global Gold, Silver Prices Fall

The weakness was also visible in international bullion markets. Spot gold declined 0.7% to $4,422.75 an ounce in Singapore trade on Monday, extending its fall after the metal tumbled more than 3% on Friday. That was its steepest one-day decline since early June. Spot silver was also lower, slipping 0.4% to $66.12 an ounce.

Precious metals were also dealing with a more complicated macroeconomic backdrop after oil prices moved higher following fresh US-Iran tensions. The US military struck Iranian rocket launchers on Sunday, marking the first American military action against Iran in more than a month.

The rise in crude prices added to concerns over inflation at a time when markets were already reassessing the outlook for US interest rates.

MCX Gold, Silver Prices Today

Domestic bullion prices tracked the weakness in international markets. MCX gold futures were trading 1.14% lower at ₹1,54,496 per 10 grams around 9:10 am, while MCX silver futures declined around 1.28% to ₹2,39,341 per kg.

The broader Indian market was also under pressure, although the decline was less pronounced than the fall in precious-metal ETFs.

At the time of writing, the Sensex was down 423 points, or 0.55 percent, at 76,842, and the Nifty 50 had shed 159 points, or 0.66 percent, to 24,016, with market breadth tilted firmly negative as 2,232 stocks declined against 1,346 advances.

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