Gold, Silver ETFs Recover Up to 10% After Crash: Market Sees Partial Rebound

Gold and silver ETFs showed signs of resilience on February 2, staging a partial recovery after sharp early losses in the trading session. Investors witnessed a rollercoaster day as the precious metals briefly tumbled before clawing back some ground.

Market Performance: A Volatile Morning

The early trading hours were rough for precious metals ETFs:

• Edelweiss Silver ETF: After hitting a 20% lower circuit, it rebounded nearly 10% to trade at Rs 232.17 by 10:30 am.
• Axis Silver ETF: Similarly down 20% earlier, it recovered around 10% to Rs 231.85.
• Gold ETFs: Experienced losses of up to 9% initially but recovered to be down around 5% at 10:40 am.

Despite these gains, most ETFs remained in the red, reflecting the ongoing market volatility and cautious sentiment.

Precious Metals Prices: Gold and Silver Bounce Back

Spotting a partial relief in metals trading:

• Gold futures (March expiry on MCX): Fell to Rs 1,40,001 per 10 grams early in the session but recovered nearly 3% to Rs 1,43,800 per 10 grams.
• Silver futures: Struggled to bounce back significantly from the day’s lows, indicating weaker investor confidence compared to gold.

Reasons Behind the Price Movements

Earlier in the day, gold and silver prices tumbled sharply, reflecting a combination of market pressures:

• Profit-booking: Investors booked gains after recent surges in metals, triggering an immediate sell-off.
• Stronger US dollar: A rising greenback added pressure on global precious metals prices.
• US Federal Reserve development: News that former Fed Governor Kevin Warsh, known for his hawkish stance, is appointed as the next head of the US central bank, influenced global markets.
• CME Group margin hikes:
  • COMEX gold futures margins raised from 6% to 8%
  • COMEX 5000 silver futures margins increased from 11% to 15%
    These changes came into effect after market close on Monday, further adding to the early volatility in the metals market.

Summary: Partial Recovery Amid Lingering Pressure

The trading session on February 2 highlighted the volatility inherent in precious metals ETFs. While gold and silver ETFs managed to claw back some losses, most remain in deep red. The combination of profit-booking, a stronger dollar, policy news from the US, and margin hikes on futures created a turbulent environment.

Investors continue to watch closely, as short-term rebounds offer relief, but the broader market sentiment remains cautious. The day’s trading underscores the importance of monitoring both domestic ETF movements and global macroeconomic signals.

Source: Moneycontrol