Gold & Silver ETFs fall sharply as dollar rises: What should investors do?

After gold and silver slipped sharply on Friday (January 31) from record levels, commodity-based ETFs tracking the precious metals witnessed an even steeper fall, reflecting the impact of the selloff in the precious metals space.

According to a report by ETBureau, the spot gold fell 5.4% to Rs 1.66 lakh per 10 grams, losing Rs 9,545 from Thursday’s close. Silver saw a steeper correction — dropping 10.7% — to Rs 3.39 lakh per kg.

The correction in spot prices extended to metal ETFs as investors locked in gains after a robust January rally.

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Satish Dondapati, Fund Manager, Kotak Mutual Fund, said that the gold and silver prices witnessed a sharp selloff, falling around 5% and 11% respectively (in USD). The decline began after both metals were trading close to all-time highs. The main reason for the selloff was the strengthening of the US dollar, which rose by about 0.30%, putting pressure on gold and silver prices.

The sharp fall was driven by a technical correction after a rapid price rise, while expectations of a hawkish US Fed reduced demand for non-interest-bearing assets like gold and silver, said a fund manager.

Nippon India Silver ETF fell 18.6% to Rs 286.48, while ICICI Prudential Silver ETF fell 20.14% and DSP Silver ETF declined 19.48%. Among the gold ETFs, Nippon India ETF Gold BeES fell 10.52%, and ICICI Prudential Gold ETF lost 8.94%.

"This has happened due to a strong profit booking, but there is no major fundamental change for both metals. As a cautionary measure, we are advising our clients about the volatility,” said Manav Modi, Commodities Analyst, Motilal Oswal Financial Services.

Ponmudi R, CEO of Enrich Money, a SEBI-registered online trading and wealthtech firm said that near-term caution is warranted due to dollar strength and volatility, but medium-to-long-term forecasts stay firmly bullish.

Strong US Dollar

United States President Donald Trump appointed Kevin Warsh as the new US Federal Chair. Following the development, the Greenback saw its biggest single-day gain since May last year. The US Dollar index is back above the mark of 97, as fears of central bank independence eased with Warsh's nomination.

Post witnessing the rally of upto 200% in 2025, silver ETFs have gained upto 52% in the current calendar year. On the other hand, its counterpart, gold ETFs which went up 102% in 2025, have gone up by 26% in 2026 so far.

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What should investors do?

While silver’s dual role as a precious and industrial metal positions it as a potent return enhancer, its historical volatility suggests that retail investors should approach the recent rally with caution. Rather than a core hedge, silver is currently best suited for tactical exposure or as a specialized component of a diversified portfolio, said Tapan Patel, Fund Manager-Commodities, Tata Asset Management.

Related to the recent ‘premium iNAV’ episodes, Patel recommends that to mitigate this, investors should avoid chasing vertical moves and instead adopt a staggered, systematic entry to benefit from price averaging during inevitable consolidations.

Patel further said that , for those already having allocation, the decision to hold or rebalance should be guided by gold-silver ratio and as the ratio compresses toward the 50 mark, investors might consider booking partial profits to reallocate into more stable assets like Gold ETFs, ensuring the portfolio remains aligned with their long-term risk appetite.

Ponmudi R further said that near-term choppiness may linger amid dollar dynamics, but disciplined buying on dips guided by key supports and channel integrity should define the next leg higher in this secular bull market into 2026.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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