Gold and Silver ETFs Dip Up to 4% Amid Renewed Tensions Following Trump's Iran War Threats

Precious Metal Prices Plummet Amid Escalating Military Hostilities

Gold and Silver exchange-traded funds (ETFs) declined significantly on Thursday, tracking a fall in precious metal prices after they retreated from two-week highs. The decline was largely attributed to the escalation of military hostilities in West Asia, which spurred fears of a rise in inflation and concerns that central banks worldwide could put a pause on rate cuts or even hike them instead.

ETF Performance

At 12:45 pm, Nippon India Silver ETF fell 4.04 percent, while Tata Silver Exchange Traded Fund slipped 4.11 percent. Among gold ETFs, Tata Gold ETF declined 2.01 percent, Nippon India ETF Gold BeeS was down 2.22 percent, and ICICI Prudential Gold ETF fell 2.16 percent.

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Futures contracts of gold and silver on the Multi Commodity Exchange plummeted amid the steep fall in prices of futures on the COMEX. Prices of both precious metals fell as an escalation in the ongoing military hostilities in West Asia sparked concerns about a rise in inflation. This led to fears that central banks worldwide could put a pause on rate cuts or even hike them instead.

Market Performance

MCX June Gold contract fell 3 percent to Rs 1,48,981 per 10g, while May silver contract fell nearly 6 percent to Rs 2.29 lakh per kg. Shares of Hindustan Zinc, the country's largest silver producer, dropped more than 3 percent to Rs 506.9 per share. Vedanta, the promoter of Hindustan Zinc, also declined up to 2 percent.

In the global market, spot gold dropped 2 percent to USD 4,664.39 per ounce, snapping a four-day gaining streak, while US gold futures fell 2.5 percent to USD 4,691.10 per ounce.

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Global Market Impact

The decline in bullion prices followed remarks by US President Donald Trump that the United States would continue its military campaign in Iran in the coming weeks, pushing crude oil prices higher and dampening expectations of interest rate cuts. In an address late Wednesday, Trump said the US would carry out strikes on Iran over the next two to three weeks and was nearing completion of its main strategic objectives.

Following the remarks, the 10-year US Treasury yield and the dollar index moved higher, putting pressure on gold prices. Meanwhile, Brent crude oil prices surged more than 6 percent on concerns over supply after indications of continued strikes on Iran's energy infrastructure.

Higher interest rates typically weigh on gold as they increase the opportunity cost of holding the non-yielding asset.