2 days ago
Gold and Silver ETFs Slide Amid Rate Hike Fears
Gold and silver prices went down sharply on August 31.
Their exchange-traded funds, which track these metals, also lost value.
Investors were worried that the US Federal Reserve might raise interest rates.
Higher interest rates can make gold and silver less attractive because they do not pay interest.
US bond yields also rose, adding pressure to precious metals.
Tensions between the United States and Iran pushed oil prices higher and raised concerns about inflation.
Gold and silver prices fell in both international and Indian markets.
Colin Shah of Kama Jewelry said the fall might be a temporary pause rather than a lasting collapse.
He said shoppers and jewelry businesses might benefit from the lower prices.
Gold and silver ETFs fell as much as 4% in morning trading on August 31.
SBI Silver ETF and Nippon India Silver ETF recorded the steepest declines, each falling about 4.06%.
Hawkish comments attributed to Federal Reserve Chair Kevin Warsh lifted expectations of a September rate hike and pushed bond yields higher.
MCX gold futures fell nearly 2% to ₹1,53,640 per 10 grams, while silver futures dropped nearly 2% to ₹2,32,501 per kilogram.
Kama Jewelry managing director Colin Shah described the decline as possible consolidation and said lower prices could support festive and wedding-season buying.
- Who
- Gold and silver ETF investors, the US Federal Reserve, and market participants were involved; Colin Shah of Kama Jewelry commented on the decline.
- What
- Gold and silver ETFs and futures fell sharply as precious-metal prices weakened.
- Where
- The declines affected Indian ETF and MCX markets, while global prices also fell.
- When
- August 31, with the reported US rate outlook influenced by comments made the previous Friday at Jackson Hole.
- Why
- Hawkish US rate expectations, higher bond yields, profit-taking, weak global cues, and US-Iran tensions contributed to the sell-off.
Bearish Market View
Consolidation and Buying Opportunity
Meaning of the price decline
Bearish Market View
Higher expected interest rates, rising bond yields, inflation concerns, profit-taking, and weak global cues could continue pressuring non-yielding gold and silver.
Consolidation and Buying Opportunity
Colin Shah said the correction may represent healthy consolidation rather than a structural downturn.
Effect of US-Iran tensions
Bearish Market View
The conflict has raised oil prices, strengthened demand for the US dollar, and increased the risk of inflation-driven rate hikes, all of which can weigh on precious metals.
Consolidation and Buying Opportunity
The article does not present a direct counterargument, but Shah’s broader view suggests investors and businesses should make real-time decisions while remaining watchful of risks.
Implications for buyers and businesses
Bearish Market View
Further rate increases and elevated yields could reduce the appeal of gold and silver investments.
Consolidation and Buying Opportunity
Lower domestic prices could benefit festive-season and wedding buyers, allow retailers to restock inventory, and reduce manufacturers’ input costs.
Key facts
- Largest ETF declines
- Nippon India Silver ETF and SBI Silver ETF fell about 4.06% in morning trade.
- MCX gold
- October gold futures fell nearly 2% to ₹1,53,640 per 10 grams.
- MCX silver
- September silver contracts fell nearly 2% to ₹2,32,501 per kilogram.
- September rate-hike probability
- Markets were pricing in a 60% probability of a US Federal Reserve rate hike, according to CME FedWatch.
- US inflation
- Personal Consumption Expenditure increased 3.7% year-on-year in July, above the Federal Reserve’s 2% target.
- US bond yields
- The 10-year Treasury yield reached 4.74%, while the 30-year yield stood at 5.22%.
- International prices
- Spot gold fell 0.3% to $4,439.31 per ounce, while spot silver fell 0.5% to $66.68.
Quotes
Kevin Warsh
Federal Reserve chair who spoke at the Jackson Hole economic symposium
“The week kicked off with gold under pressure, witnessing a sharp correction of nearly 2% on the MCX, influenced by aggressive profit-taking and soft global cues. While short-term technical selling is dominating the current price trajectory, this pullback can be actually treated as a healthy consolidation rather than a structural downturn.”
livemint.com
“Overall, it remains vital to remain watchful of the headwinds and make real-time decisions at both a customer and business level.”
livemint.com
Sources
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