Silver exchange traded funds (ETFs) saw deep cuts Thursday, with some of them plunging as much as 21%. Axis’ dropped the most, hitting a low of Rs 216.86 as against the previous close of Rs 275, while others dropped between 12% and 17%. The sharp plunge was primarily due to profit-booking after two days of recovery rally following the worst correction on record since 1980 earlier this week when they tanked as much as 30%.
Between January 28 and February 2, silver and gold spot prices had lost 32% and 13%, respectively. In the two sessions that followed, silver and gold recovered 11% and 6.5%, respectively. Thursday’s trade once again brought selling pressure back into the market.
The trigger for last Friday’s heavy selloff when silver lost 31% and gold lost 11% was the news that US President Donald Trump nominated Kevin Warsh to lead the Federal Reserve from May, which unsettled global commodity markets. According to Bloomberg, silver recorded its biggest ever single-day fall since 1980 last Friday tanking 31%, while gold registered its sharpest decline since 2013 plunging 11%.
Following the sharp decline, the commodity exchange MCX imposed additional margins on silver and gold futures across all variants. The bourse imposed an extra 4.5% margin on silver futures and 1% on gold futures with immediate effect from Thursday.
On MCX, silver March futures were down 10.42% or Rs 28,008/kg to Rs 2,40,842, while gold April futures were at Rs 150,981/10 g, down Rs 2,065 or 1.35% at 1945 hrs on Thursday. These metals had opened with deeper cuts in the day with gold April futures losing around 3% to Rs 1,48,455/10 grams and the June contracts falling around 3%, while silver March futures dropped 11% to Rs 2,39,000/kg and the May contracts also fell 11%. Both these metals have crossed the Rs 2 lakh and Rs 4 lakh marks respectively last week.
On the CME, the yellow metal was down 1.70% to $4,868.40/oz and the white metal was down 9.47% to $76.35/oz at 1920 IST.
But ETFs fared much worse later in the day when they lost up to 21%. On Wednesday, ETFs were up by as much as 9% and gold and silver futures were up for a second consecutive session.
The news of upcoming US-Iran talks in Oman on Friday also dampened safe-haven demand, traders said, adding that a strong dollar and an increase in margin requirements by MCX on silver futures also drove the white metal lower.
While Axis was the worst hit with a 21% hit at a low of Rs 216.86 vs the previous close of Rs 275, losing 21%, other ETFs, including DSP, SBI and Kotak, declined 16–17% during the session. Others got mauled badly, with Edelweiss falling more than 15% and 360 One, Mirae Asset, SBI, UTI, Axis, ICICI Prudential, HDFC and others falling 12-17% each.
According to market experts, today's fall is driven mostly by profit booking after two days of gains.
According to Renisha Chainani, the head of research at gold trading platform Augmont, the crash is primarily due to easing geopolitical tensions coupled with renewed selling pressure and heightened volatility returned to precious-metal markets snapping a two-day rebound.
China’s gold ETFs saw record daily outflows, with nearly $1 billion withdrawn from major bullion-backed funds after the sharp price correction unsettled investor confidence.
On the geopolitical front, Iran–US talks are scheduled for Friday, while President Trump held wide-ranging discussions with his Chinese counterpart Xi Jinping ahead of a proposed April visit, following Xi’s recent virtual meeting with Russia’s Vladimir Putin.
Chainani feels that in the short term, gold prices are likely to remain weak and consolidate within the $4,550–5,100 range (Rs 1,40,000–1,60,000), while silver is also expected to trade weak and consolidate in the $74–91 range (Rs 2,35,000–2,85,000).
Markets are now focused on US non-farm payrolls data and final services PMI readings from major global economies, said Kaynat Chainwala, AVP--commodity Research at Kotak Securities. However, the analyst added the primary focus remains on Friday’s official US jobs report for signals on the timing of the next Federal Reserve rate cut.
“CME FedWatch currently shows no easing priced in until May, with June reflecting just a 44.1% probability of a 25 bps cut vs a 44.9% chance of rates being held unchanged,” Chainwala said.
The "flash crash" in gold and silver, triggered by a hawkish US Fed nominee and increased margin requirements, is viewed by many as a necessary cooling of "overbought" markets rather than a trend reversal, said Abhinav Tiwari, a research analyst at Bonanza.
He, however, noted that the long-term outlook remains structurally bullish, despite the volatility. “Record central bank buying, silver’s persistent supply deficit, and geopolitical tensions provide a solid floor,” he said.
Manoj Kumar Jain of Prithvi Finmart said gold has support at Rs 1,50,500–1,47,700 and resistance at Rs 1,56,800–1,60,000, whereas silver has support at Rs 2,61,100–2,55,000 and resistance at Rs 2,78,000–2,86,000.
Jain said the precious metals are witnessing sharp price swings, although silver is likely to hold support near $71/ounce and gold around $4,440/ounce on a weekly closing basis.