Gold, silver ETFs crash up to 10%: Should you invest?
What's the story
Gold and silver exchange-traded funds (ETFs) witnessed a massive crash of up to 10% on Friday. The fall was triggered by a sudden spike in the US dollar, following stronger-than-expected job data for January. The news has dampened expectations of interest rate cuts in the near term.
Market impact
Kotak Silver ETF crashes 10%
The Kotak Silver ETF bore the brunt of this market shift, crashing 10% to hit a low of ₹225.11 on Friday. Other silver ETFs such as Edelweiss Silver ETF, SBI Silver ETF, and Zerodha Silver ETF also fell by up to 9% each. In the gold fund category, Tata Gold ETF witnessed the highest drop of about 6%, followed by SBI Gold ETF and Nippon India Gold ETF which fell around 4% each on Friday.
Global rebound
Gold, silver bounce back in international markets
In international commodity markets, gold and silver made a comeback on Friday as bargain-hunting kicked in after both metals hit one-week lows in the previous session. Spot gold rose about 1% to $4,966.83 per ounce, recovering from a more than 3% drop that had pushed prices below the key $5,000 mark. Similarly, spot silver climbed 2.1% to $76.76 per ounce after an 11% fall recorded on Wednesday.
Currency influence
SIPs recommended for managing volatility
The US dollar remained largely unchanged against major currencies, holding steady after mixed economic data. A stronger dollar usually makes greenback-denominated metals more expensive for other currency holders, which can impact demand. Abhishek Bhilwaria of BhilwariaMF suggested that due to the higher volatility of silver, a Systematic Investment Plan (SIP) is an effective way to manage extreme volatility in gold and silver markets by investing fixed amounts regularly.
Investment strategy
Investors advised to avoid fresh positions
Manoj Kumar Jain of Prithvi Finmart said bullion markets are witnessing sharp volatility due to multiple global triggers. These include US inflation data, nuclear deal talks between the US and Iran, Lunar New Year holidays in China, and reports of negotiations involving the US and Russia. He advised investors to avoid fresh positions for now as gold holds key weekly support near $4,770 per troy ounce while silver around $65 per troy ounce.