Gold, silver ETFs surge up to 9% as precious metals extend rebound: What lies ahead?

Gold and silver

• Gold and silver ETFs surged up to 9 percent as precious metals rebounded sharply
• Gold futures rose over 4.5 percent; silver futures jumped 6 percent on MCX
• Analysts expect a moderately bullish trend for gold and silver this week

Did our AI summary help?

Gold and silver exchange traded funds (ETF) gained sharply in trade on February 4 as precious metals extended rise. This came after the ETFs along with the metals sharply crashed earlier.

Despite the ongoing rebound, gold and silver, along with their respective ETFs are yet to scale back to their lifetime highs which they hit in late January this year.

Gold and silver surges:

Gold futures with April expiry on the Multi Commodity Exchange of India (MCX) jumped more than 4.5 percent to trade at Rs 1,60,755 per 10 grams in the morning trading hours. The contracts with June and August expiries meanwhile gained around 5 percent each.

Silver futures with March expiry jumped 6 percent to trade at Rs 2,84,094 per kilogram. The contracts with May and July expiries surged 6 percent and 5 percent respectively.

Gold and silver ETFs:

Tata Silver ETF gained around 9 percent, while Kotak Silver ETF gained around 8 percent. Nippon India Silver ETF, ICICI Prudential Silver ETF, SBI Silver ETF, Aditya Birla Sun Life ETF and UTI Silver ETF gained more than 7 percent each, as seen at 10.30 am.

Groww Silver ETF, HDFC Silver ETF, Zerodha Silver ETF and others gained around 7 percent each, while Edelweiss Silver ETF gained around 9 percent.

The Wealth Company Gold ETF gained around 7 percent, while Quantum Gold ETF and Edelweiss Gold ETF gained more than 5 percent each. Choice Gold ETF, Motilal Oswal Gold ETF, DSP Gold ETF, Axis MF Gold ETF, Tata Gold ETF, Union Gold ETF, Zerodha Gold ETF, LIC MF Gold ETF, SBI Gold ETF, Invesco India Gol ETF, Nippon India ETF GoldBees and others gained more than 4 percent each.

What lies ahead?

Gold and silver prices have rebounded significantly from their near-term bottoms. “After a recent fall, Gold price has pullback from the 38% of Fib. Retracement level placed at 137,728. Immediate resistance would be at 23% of Fib. Retracement level placed at 154,215. Breakout of this level will boost the upside momentum in Gold price and next resistance would be at 160,000 – 167,000,” said Aamir Makda, Commodity & Currency Analyst, Choice Broking.

“On the other side, Silver price has started trading over 50% of Fib. Retracement level which is at 253,468, having pullback towards 38% of Fib. Retracement level placed at 292,928. Breakout of this level will continue the upward move in Silver ahead and next hurdle would be at 341,773,” he added.

The analyst expects a moderately bullish trend in gold and silver ahead in this week.

A dramatic unwind which hit gold and silver markets recently, erased a chunk of their record breaking January gains. The plunge began after CME Group hiked margin requirements on both metals, forcing leveraged traders to liquidate positions and accelerating a wave of selling. In additions, the selloff intensified as markets digested reports that US President Donald Trump is set to nominate Kevin Warsh—viewed as a hawkish, dollar supportive choice—as the next Federal Reserve Chair. The shift revived expectations of tighter policy and triggered a sharp rebound in the U.S. dollar, which is negative for precious metals.

“The correction was amplified by extreme overbought conditions after gold and silver touched unprecedented highs just days earlier, with silver having surged more than 60% in a month and gold over 20%. Profit taking cascaded into panic selling as liquidity thinned and volatility spiked,” said Hareesh V, Head of Commodity Research, Geojit Investments.

“The violent drop more like a technical correction than a deterioration in core fundamentals, noting that longer term drivers—geopolitical tensions, central bank buying and macro uncertainty—remain intact,” he added.

"It's a reasonable call that this is somewhere around fair value potentially, if you consider that we saw a market behaving fairly irrationally for a few weeks there," Reuters quoted Kyle Rodda, a senior market analyst at Capital.com, as saying.

The sharp rise in the precious metals also comes amid rising expectations for at least two rate cuts by the American Federal Reserve this year.

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