Gold and silver ETFs have crashed: What should investors do?
What's the story
Gold and silver exchange-traded funds (ETFs) have witnessed a sharp decline of up to 15% in 2 days in India. The fall comes as gold futures on the Multi Commodity Exchange of India (MCX) fell nearly 3% to ₹1,43,335 per 10g in early trading hours today. This is a massive drop of around 26% or ₹50,000 after hitting a lifetime high of ₹1,93,096 per 10g on Thursday.
Market downturn
Silver futures witness a steep fall
Silver futures for March delivery on MCX have also witnessed a steep fall of 6% to ₹2,49,713 per kilogram. This is a decline of about 41% or ₹1,70,335 after hitting a lifetime high of ₹4,20,048 per kilogram on Thursday. The contracts with May expiry have also fallen by 6% to ₹2,65,502 per kilogram.
ETF impact
Major declines observed in gold ETFs
Gold ETFs have witnessed major declines. Edelweiss Gold ETF and HDFC Gold ETF have both fallen by more than 9% each. Other ETFs such as Baroda BNP Paribas Gold ETF, Nippon India ETF (GoldBees), and others have also seen major drops. The sharp fall in gold and silver prices is attributed to rampant profit-booking amid a stronger dollar.
Margin hike
CME Group hikes margins on metal futures
CME Group has also announced a hike in margins on its metal futures, effective after market close today. The move is expected to further weigh on precious metals. COMEX gold futures margins have been raised from 6% to 8%, while the COMEX 5000 silver futures are set to increase to 15% from the current level of 11%.