Silver, Gold ETFs Rally Up To 4% As US Bond Yields Ease; Tata Silver ETF, Nippon Silver ETF Among Top Gainers

Silver and gold exchange-traded funds (ETFs) were in strong demand on Thursday as easing US Treasury yields and a weaker dollar improved sentiment towards precious metals.

The rally followed the US Treasury Department's announcement that it would double the size of its liquidity support buyback operations, helping ease the recent pressure in the US bond market. The yield on 30-year US Treasuries fell to 5.18% after touching 5.3% on Tuesday.

Among silver ETFs, Tata Silver ETF, Nippon Silver ETF, HDFC Silver ETF, SBI Silver ETF, Axis Silver ETF, DSP Silver ETF and Groww Silver ETF gained more than 4% each. Mirae Asset Silver ETF, ICICI Prudential Silver ETF, Aditya Birla Sun Life Silver ETF, Edelweiss Silver ETF and Motilal Oswal Silver ETF also advanced more than 3%.

Gold ETFs followed the broader precious metals rally. 360 ONE Gold ETF, DSP Gold ETF, Kotak Gold ETF, Axis Gold ETF, The Wealth Company Gold ETF, ICICI Prudential Gold ETF, Tata Gold ETF, Choice Gold ETF and UTI Gold ETF rose between 2% and 2.5%.

At the last check, MCX September silver futures were trading 1.2% higher at Rs 2,39,841 per kg, while gold futures gained 0.30% to Rs 1,58,475 per 10 grams.

Silver ETFs have gained around 7.5-8% over the past month, while gold ETFs have delivered returns of around 9.5-10% during the same period.

Key Reasons Behind ETF Rally

The latest move in precious metal ETFs has been supported by the decline in US bond yields. Lower yields reduce the relative attractiveness of interest-bearing assets, supporting demand for gold and silver, which do not generate interest income.

The Treasury's expanded buyback programme also helped calm the recent rise in bond yields. With yields easing from recent highs, investors have increased exposure to precious metals, pushing both the underlying commodities and ETFs higher.

The weaker dollar has added to the support. Gold and silver are traded globally in US dollars, so a decline in the currency makes the metals relatively cheaper for buyers using other currencies. This can encourage demand and support prices.

Silver has also been moving faster than gold in the latest rally. The metal benefits not only from investment demand but also from its industrial use, giving it an additional source of demand. The stronger move in silver has therefore translated into bigger gains for several silver ETFs compared with gold ETFs.

With the underlying precious metals continuing to trade near elevated levels, movements in US bond yields and the dollar are likely to remain important for ETF performance in the near term.

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